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BY: Om

RERISTRATION UNIT
BILLS AND INDEX SERVICE

Republic of the Philippines
HOUSE OF REPRESENTATI
Quezon City, Metro Manila

Seventeenth Congress
First Regular Session

House Bill No. __

Introduced by Honorable Roy M. Loyola

EXPLANATORY NOTE

Well enshrined in our Constitution are policies that are geared towards
alleviating the plight of our less fortunate brethren as well as promoting
equality and uniformity of our laws, to wit

“The State shall promote a just and dynamic social order that
will ensure the prosperity and independence of the nation
and free the people _from_poverty through policies that
provide adequate social services, promote full employment, a
rising standard of living, and an improved quality of life for
all", (Section 9, Articie Il) and,

“The tule of taxation shall_be uniform and equitable The
Congress shall evolve a progressive system of taxation.”
(Section 28(1), Article VI) (Emphasis supplied.)

Anchored on said Constitutional precepts. this bill seeks to ease the
burden of marginalized income eerners (MIEs) in our society. MIEs, as
defined under Revenue Regulation (RR) No. 7-2012 and clarified under
Revenue Memorandum Circular (RMC) No. 7-2014, are those individuals not
deriving compensation as an employee under an employer-employee
relationship and are self-employed and deriving gross sales or receipts not
exceeding One hundred thousand pesos (P100,000,00) in any 12-month
period. Included in this definition are sari-sari store owners, fisher folks
farmers, vendors and those similarly situated. Moreover, said RMC
emphasized that licensed professionals, consultants, artists, sales agents,
brokers and others similarly situated are not to be considered as MIEs.

{HOUSE 9F REPRESENTATIVES


The Bureau of Internal Revenue (BIR) issued last 5 February 2014 said
RMC No, 7-2014, which clarified the issues on the registration and tax
compliance requirements of MIEs pursuant to RR No. 7-2012. These
requirements under said RMC include (1) registration with the Bureau using
BIR Form 1901, (2) exemption fron payment of Annual Registration Fee, (3)
registration of books of accounts, (4) issuance of registered principal
receipts/sales invoices, (5) filing and payment of Annual Income Tax Return.
and (6) exemption from payment of business taxes

As the requirements of the above RMC seem to be onerous on the part
of these MIEs, it is the intention of this bill to remove this burden from the
shoulder of our marginal earners by providing for their exemption from the
Payment of income taxes, value-added taxes and percentage taxes
Additionally, this bill also seeks to amend the National Internal Revenue Code
(NIRC) by exempting MIEs from the payment of the annual registration fee
under Section 236 thereof, and by including MIEs in the list of individuals not
required to file an income tax retum as provided under Section 51 (A)(2)

In addition to the above proposed amendments, this bill also aims to
raise the threshold of the total gross sales/receipts of MIEs or their “income
cap" to one hundred fifty thousand pesos (P'150,000.00) during any 12-month
period. Said income cap shall likewise be indexed to the annual rate of
inflation. This adjustment shall be made in order to make this proposed
measure reflective of the changing times and responsive to the needs of the
MIEs in the years to come

With the passage of this bill, it is hoped that it could help the lives of
our simple farmers, fisherfolk, small sari-sari or carinderia owners, and tricycle
operators/drivers by protecting them from fiscal policies that are too
burdensome for them to bear.

Hence, early approval of this bill is eamestly prayed.

'Y M. LOYOLA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
First Regular Session

261

House Bill No.

Introduced by Honorable Roy M. Loyola

AN ACT EXEMPTING MARGINAL INCOME EARNERS
FROM INCOME TAX, VALUE ADDED TAX AND OTHER PERCENTAGE
TAXES, AMENDING FOR THE PURPOSE SECTIONS 22, 24, 51, 109 (1)
AND 236 OF THE NATIONAL INTERNAI. REVENUE CODE OF 1997, AS
AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the House of Representatives and the Senate of the

Philippines in Congress assembled.

RON=

SECTION 1. Section 22 of Republic Act No. 8424, as amended
otherwise known as the National Internal Revenue Code of 1997, is
hereby further amended by adding the following definition after
‘Subsection (HH) to read as follows
"SEC. 22. Definitions. - When used in this Title.

"(A) xxx"
(HH) x xx

"(Il) “THE TERM ‘MARGINAL INCOME EARNER’ SHALL
REFER TO AN INDIVIDUAL WHO IS NOT DERIVING

10 COMPENSATION AS AN EMPLOYEE UNDER AN
11. EMPLOYER-EMPLOYEE RELATIONSHIP EITHER IN THE


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PRIVATE OR PUBLIC SECTOR BUT ONE WHO IS
SELF-EMPLOYED ENGAGED IN ACTIVITIES PRINCIPALLY
FOR SUBSISTENCE OR LIVELIHOOD DERIVING GROSS
SALES/RECEIPTS NOT EXCEEDING ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00) DURING ANY 12-MONTH
PERIOD.”

“(JJ) THE TERM ‘INCOME CAP’ SHALL REFER TO THE
THRESHOLD AMOUNT OF ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00).

SECTION 2, The income cap on the gross sales or receipts of
the marginal income earners defined under this Act shall be increased
by three percent (3%) every year thereafter effective January 2016
through revenue regulations issued by the Secretary of Finance.

SECTION 3. Section 24 (A) of Republic Act No. 8424. as
amended, otherwise known as the National Internal Revenue Code of
1997, is hereby further amended to read as follows.

"Section 24. Income Tax Rates. ~

“(A) Rates of Income Tax on Individual Citizen and Individual
Resident

Alien of the Philippines. -
"(1) 00"

"(2) x xx"

x xx!

"Provided, That minimum wage earners as defined in Section 22
(HH) of this Code shall be exempt from the payment of income
tax on their taxable income; Provided, further, That the holiday
pay, overtime pay, night shift differential pay and hazard pay


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received by such minimum wage earners shall likewise be
exempt from income tax.

"IN THE CASE OF MARGINAL INCOME EARNERS AS
DEFINED UNDER SECTION 22 (Il) OF THIS CODE, ALL
INCOME DERIVED FROM THEIR PRINCIPAL SOURCE OF
LIVELIHOOD SHALL ALSO BE EXEMPT FROM INCOME
TAX."

Sec. 4. Section 109 (1) of Republic Act No. 8424, as amended
otherwise known as the National Internal Revenue Code of 1997, is

hereby further amended to read as follows

"Section 109. Exempt Transactions.- (1) Subject to the
provisions of Subsection (2) hereof, the following transactions
shall be exempt from the value-added tax:

(A) xxx

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"(W) Sale or lease of goods or properties or the performance of
services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not
exceed the amount of One million five hundred thousand pesos
(P1,500,000): Provided, That not later than January 31, 2009 and
every three (3) years thereafter, the amount herein stated shall
be adjusted to its present value using the Consumer Price
Index, as published by the National Statistics Office (NSO):

"(X) SALE OR LEASE OF GOODS AND SALE OF SERVICES
BY MARGINAL INCOME EARNERS WHOSE GROSS SALES
OR RECEIPTS DERIVED FROM THEIR PRINCIPAL SOURCE
OF LIVELIHOOD DO NOT EXCEED ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00): PROVIDED, THAT NOT
LATER THAN JANUARY 1, 2016 AND EVERY YEAR
THEREAFTER, THE AMOUNT HEREIN STATED SHALL BE
ADJUSTED BY 3% THROUGH REVENUE REGULATIONS TO
BE ISSUED BY THE SECRETARY OF FINANCE.”


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Sec. 5. Section 51 (A)(2)(d) of Republic Act No, 8424, as
amended, otherwise known as the National internal Revenue Code of

1997, is hereby further amended to read as follows:

“Sec. 61. Individual Return, —
“(A) Requirements. —
“(1) 200

*(a) xxx

XX,
"(2) 100%

*(a) xxx

XxX

“(d) A minimum wage earner as defined in Section 22(HH) AS
WELL AS A MARGINAL INCOME EARNER DEFINED UNDER
SECTION 22(1I)of this Code, or (an} ANY OTHER individual who
is exempt from income tax pursuant to the provisions of this
Code and other laws, general or special.”

Sec. 6. Section 116 of Republic Act No. 8424, as
amended, otherwise known as the National Internal Revenue
Code of 1997, is hereby further amended to read as follows

“Sec, 116. Tax on Persons Exempt from Value-added Tax
(VAT). — Any person whose sales or receipts are exempt under
Section 109(V) of this Code from the payment of value-added
tax and who is not a VAT-registered person shall pay a tax
equivalent to three percent (3%) of his gross quarterly sales or
receipts: Provided, That MARGINAL INCOME EARNERS AND
cooperatives shall be exempt from the three percent (3%) gross
receipts tax herein imposed."


4 SECTION. 7. Section 236 (B) of Republic Act No. 8424,
2 as amended, otherwise known as the National Internal
3 Revenue Code of 1997, is hereby further amended to read as
follows

4 "Section 236. Registration Requirements, —
5 NA) X xx

6 — "(B) Annual Registration Fee. - An annual registration fee in the
7 amount of Five hundred pesos (P500) for every separate or
8 distinct establishment of place of business, including facility
9 types where sales transactions occur, shall be paid upon

10 registration and every year thereafter on or before the last day of
11 January; Provided, however, That cooperatives, individuals
12 earning purely compensation income whether locally or abroad
13 MARGINAL INCOME EARNERS, and overseas workers are not
14 liable to the registration fee herein imposed,”

15 "xox"

16 SECTION 8. IMPLEMENTING RULES AND REGULATIONS. ~
17 The Secretary of Finance, shall upon the recommendation of the
18 — Commissioner of Internal Revenue, promulgate not later than thirty (30)
19 days upon the effectivity of this Act the necessary rules and regulation:

20 for its proper and effective implementation

21 SECTION 9. REPELAING CLAUSE - All laws,

22 Presidential Decrees, Executive Orders, issuances, presidential

23 proclamaticns, ruies and regulations or parts thereof which are contrary

24 to and inconsistent with any provision of this Act are hereby repealed

25 amended or modified accordingly


26 SECTION 10. EFFECTIVITY. - This Act shall take effect fifteen
27 (15)

days after its complete publication either in the Officiai Gazette, or
28

in at least two (2) newspapers of general circulation

Approved,