f.· 
SIXTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
S. No. 
253 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
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JUL -1 
P5 :18 
One of the more serious problems besetting a developing nation such as the Philippines is 
a high unemployment rate. Official statistics as of July 2012 pegged the unemployment rate at 
7% corresponding to around 2.8 million unemployed Filipinosl. 
It becomes imperative, therefore, for the State to facilitate the generation of jobs for its 
citizens through any means that may be within its power. After all, one of the national 
govermnent's mandates under the present Constitution is to promote full employment for 
Filipinos by encouraging the growth of the national economy through enterprise. 
It is this same mandate that prompted Congress to enact three vital pieces of legislation 
that advance the welfare of the Filipino enterprise: Republic Act No. 6977 or the Magna Carta 
for Small Enterprises; RA 9178 or the Barangay Micro Business Enterprises Act of 2002; and 
RA 9501 or the Magna Carta for Micro, Small and Medium Enterprises. 
These laws provide aid and incentives to more than 816,759 micro, small and medium 
enterprises (MSMEs), which according to latest data comprise 99.6% of all business enterprises 
in the Philippines2• 
Records show that in 2011, MSMEs employed a total of 3.9 million individuals, 
dwarfing that of large-scale industries which only generated 2.5 million jobs as of the same 
year3. This fact is a testament to the ability of MSMEs to generate employment given the right 
conditions. 
However, stringent regulatory requirements of both the local and national government 
inhibit the growth of the MSME sector. And unfortunately, most of those who are unable to 
comply with such painstaking requisites end up either closing shop or joining the informal sector 
or the underground economy. 
This bill aims to prevent this situation from hindering the growth of MSMEs and instead 
encourage their development by providing more incentives to those who may generate 
employment by exploring their entrepreneurial spirit. 
Aptly entitled "The Jobs Act of 2013," this bill also aims to stimulate the growth of 
MSMEs by exempting them from certain strict government regulation that would otherwi~e 
discourage their proliferation. 
1 See National Statistics Office National Quick Stat as of December 2012 accessed at 
http://www.census.gov.ph/sites/default/files/attachments/ird/quickstat/December2012.pdf on March11, 2013. 
2 Department of Trade and Industry, 2011 data on Micro, Small and Medium Enterprises (MSMES) accessed at 
www.dti.gov.ph on March 11, 2013. 
3 Ibid. 


It also increases the threshold amount of the assets used in the classification of MSMEs 
to the following; from not more than P3 million to not more than PS million for micro 
enterprises; from P3,OOO,OOI to PIS million, the threshold amount for small enterprises is now 
from PS,OOO,OOI to PIS million; while it remains the same for medium enterprises, from 
PIS,OOO,OOI to PIOO,OOO,OOO. 
If enacted into law, micro enterprises - which comprise the bulk of MSMEs - will be 
exempted from income tax and the Minimum Wage Law, provided that they give their 
employees the same benefits given to any regular employee like social security and healthcare 
benefits. The bill also exempts micro, small and medium enterprises from Value-Added Tax 
(V AT) registration and Percentage Tax for those whose annual gross selling price or gross value 
in money received from the sale, barter, or exchange of goods, as well as the annual gross 
receipts derived from the sale or exchange of services do not exceed Three Million Pesos 
(P3,OOO,OOO.OO). 
Moreover, registered small and medium enterprises which shall hire additional 
employees shall be allowed a deduction from its gross income in the amount of Forty Thousand 
Pesos (P40,OOO.OO) for each new employee hired. The maximum allowable deduction is pegged 
at Eighty Thousand Pesos (P80,OOO.OO) for two or more new jobs created. 
This bill also encourages micro enterprises from the underground economy to join, or 
rejoin as the case may be, the formal sector. 
In hindsight, MSME is probably the best way of generating much-needed employment in 
the country. It is therefore the responsibility of government to ensure their viability and 
continued growth. 
In view of the foregoing, the passage of this bill is sincerely sought. 


SIXTEENTH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
253 
S.No. __ _ 
Introduced by Senator Ralph G. Recto 
AN ACT 
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PROMOTING JOB GENERATION BY PROVIDING ADDITIONAL INCENTIVES TO 
MICRO, SMALL AND MEDIUM ENTERPRISES 
Be it enacted by the Senate and the House of Representative of the Philippines in 
Congress assembled: 
1 
SECTION 1. Short Title. - This Act shall be known as the "Jobs Act of 2013". 
2 
Sec. 2, Declaration of Policy. - It is hereby declared the policy of the State to hasten 
3 
economic development by generating employment through the formation and growth of micro, 
4 
small and medium enterprises (MSMEs) which effectively serve as seedbeds of Filipino 
5 
entrepreneurial talents, and integrating those in the informal sector with the mainstream economy 
6 
through the active involvement of the government especially in the local level, the grant of 
7 
additional incentives and benefits and the rationalization of existing bureaucratic regulations. 
8 
Sec. 3. Micro, Small and Medium Enterprises (MSMEs). - MSMEs shall refer to any 
9 
business activity or enterprise engaged in the production, processing or manufacturing of 
10 
products or commodities, trading and services, whether single proprietorship, cooperative, 
11 
partnership or corporation whose total assets must have value falling under the following 
12 
categories: 
13 
14 
15 
Micro 
Small 
Medium 
not more than 
P5,OOO,OOI 
PI5,OOO,OOI 
P5,000,000 
PI5,000,OOO 
PIOO,OOO,OOO 
16 
The above classification of MSMEs shall be subject to review and adjustments by the 
17 
Micro, Small and Medium Enterprises Development (MSMEb) Council created under Section 6 
18 
of Republic Act 6977, as amended, or upon recommendation of sectoral organizations 
19 
concerned, taking into account inflation and other economic indicators. 
20 
The term "services" shall exclude those rendered by anyone, who is duly licensed by the 
21 
government after having passed a government licensure examination, in connection with the 
22 
exercise of one's profession. 
23 
The term "assets" refers to all kinds of properties, real or personal, owned by the MSME, 
24 
including those arising from loans, and used for the conduct of its business as defined by the 


, , 
1 
MSMED Council: Provided, That for the purpose of exemption from taxes and fees under this 
2 
Act, this term shall mean all kinds of properties, real or personal, owned and/or used by the 
3 
MSME for the conduct of its business as defined by the MSMED Council. 
4 
Notwithstanding the, plans and programs set for MSMEs, the Council shall ensure that a 
5 
set of policies, plans and programs shall be formulated and implemented according to the 
6 
specific needs of each sector, encouraging MSMEs to graduate to a higher category. 
7 
Sec. 4. Who are Eligible to Register. - Any person, natural or juridical, or cooperative, or 
8 
association, having the qualifications as defined in Section 3 of this Act may apply for 
9 
registration as MSME. 
10 
Sec. 5. Registration and Fees. -
11 
(a) Micro Enterprises. - The Office of the Treasurer of each city or municipality shall 
12 
register the micro enterprise and issue a Certificate of Authority to enable the micro enterprise to 
13 
avail of the benefits under this Act. Any such application shall be processed within fifteen (15) 
14 
working days upon submission of complete documents. Otherwise, the micro enterprise shall be 
I 
15 
deemed registered. The Municipal or City Mayor may designate a Micro Enterprise Registration 
16 
Officer who shall be under the Office of the Treasurer. Local government units (LGUs) shall 
17 
establish a One-Stop-Business Registration Center to handle the efficient registration and 
18 
processing of permits/licenses of the concerned enterprises. Likewise, LGUs shall make a 
19 
periodic evaluation of the micro enterprise's financial status for monitoring and 
20 
reporting purposes. 
21 
To defray the adminrstrative costs of registering and monitoring the micro enterprises, the 
22 
LGUs may charge a fee not exceeding One Thousand Pesos (PI,OOO.OO). The LGU shall then 
23 
issue a Certificate of Authority effective for a period of two (2) years, renewable every two (2) 
24 
years. 
25 
(b) Small and Medium Enterprises - The Department of Trade and Industry (DTI), through 
26 
its field offices, shall register the small and medium enterprises (SMEs) and issue a Certificate 
27 
of Authority to enable the SME to avail ofthe benefits under this Act. Any such application shall 
28 
be processed within fifteen (15) working days upon submission of complete documents. 
29 
Otherwise, the SME shall 'be deemed registered. The DTI may designate a SME Registration 
30 
Officer who shall be under the DTI field office concerned. The DTI field offices shall establish a 
31 
One-Stop-Business Registration Center to handle the efficient registration and processing of 
32 
permits/licenses of concerned enterprises. Likewise, the DTI shall make a periodic evaluation of 
33 
the SME' s financial status for monitoring and reporting pUI'poses, 
34 
To defray the administrative costs of registering and monitoring the micro enterprises, 
35 
the DTI field office may charge a fee not exceeding One Thousand Pesos (Pl,OOO.OO). The DTI 
36 
shall then issue a Certificate of Authority effective for a period of two (2) years, renewable every 
37 
two (2) years. 
38 
Sec. 6. Incentives and Benefits. -


1 
A. Micro Enterprises: The following incentives and benefits shall be made available to 
2 
registered micro enterprises: 
3 
1. 
Exemption from Income Tax. - All micro enterprises shall be exempt from the 
4 
payment of income tax with respect to income received from the operations of the 
5 
enterprise; and 
6 
2. 
Exemptionfrom the Coverage of the Minimum Wage Law. - All micro enterprises 
7 
shall be exempt from the coverage of the Minimum Wage Law: Provided, That all 
8 
employees covered under this Act shall be entitled to the same benefits given to any 
9 
regular employee such as, among others, social security and healthcare benefits. 
10 
B. Small and Medium Enterprises. - Registered small and medium enterprises which shall 
11 
hire additional employees subsequent to its registration under this Act, shall be allowed a 
12 
deduction from its gross income in the amount of Forty Thousand Pesos (P40,000.00) for each 
13 
new employee hired: Provided, That the maximum allowable deduction from gross income shall 
14 
not exceed Eighty Thousand. Pesos (P80,000.00): Provided, further, That the employment must 
15 
be continuous for a period of at least one (1) year: Provided, finally, That the incentive shall no 
16 
longer be applicable upon the termination of the employee. 
17 
This incentive can only be availed of for a period of five (5) years from the effectivity of 
18 
this Act. 
19 
C. Micro, Small and Medium Enterprises. - In addition to the above incentives, MSMEs 
20 
shall be entitled to the following: 
21 
1. 
Exemption from Value-Added Tax (VAT) Registration and Percentage Tax. -
22 
Registered MSMEs whose annual gross selling price or gross value in money received 
23 
from the sale, barter, or exchange of goods, as well as the annual gross receipts derived 
24 
from the sale or exchange of services do not exceed Three Million Pesos (P3,000,000.00) 
25 
shall not be required to be a VAT-registered entity and shall likewise be exempt from the 
26 
payment of percentage tax under the National Internal Revenue Code, as amended; and 
27 
2. 
Local Taxes and Fees. - Local Govermnent Units are encouraged either to reduce 
28 
the amount of applicable local taxes, fees and charges imposed or to exempt the MSMEs 
29 
from the payment of local taxes, fees and charges. 
30 
Sec. 7. Mandatory Allocation of Credit Resources to Micro, Small and Medium 
31 
Enterprises. - For a period of ten (l0) years from the date of the effectivity of this amendatory 
32 
Act, all lending institutions as defined under Bangko Sentral ng Pilipinas rules, whether public or 
33 
private, shall set aside at least eight percent (8%) for micro, small and medium enterprises of 
34 
their total loan portfolio based on their balance sheet as of the end of the previous quarter, and 
35 
make it available for MSME credit as provided under Sec. 15 of Republic Act No. 6977, as 
36 
amended. 


" 
1 
Any existing laws to the contrary notwithstanding, interests, commissions and discounts 
2 
derived from the loans by any lending institutions granted to MSMEs under this Act shall be 
3 
exempt from gross receipts tax (GRT). 
4 
Sec. 8. Information Dissemination. - The Philippine Information Agency (PIA), in 
5 
coordination with DTI, BSP, Department of Labor and Employment (DOLE), and DILG shall 
6 
ensure the proper and adequate information dissemination of the contents and benefits of this Act 
7 
to the general public especially to its intended beneficiaries specifically in the barangay level. 
8 
Sec. 9. Annual Report. - The DTI, BSP, DOLE and DILG, shall submit an annual report 
9 
to Congress on the status ofthe implementation of this Act. 
10 
Sec. 1 O.Implementing Rules and Regulations. - The Secretary of the Department of 
11 
Trade and Industry, in consultation with the Secretaries of DILG, DOF, DOLE and BSP 
12 
Governor shall formulate the necessary rules and regulations to implement the provisions of this 
13 
Act within ninety (90) days after its approval. The rules and regulations issued pursuant to this 
14 
Act shall take effect fifteen (15) days after its publication in a newspaper of general circulation. 
15 
Sec. 11. Penalties. -
16 
a) Any person who, shall willfully violate any provision of this Act or who shall in any 
17 
manner commit any act to defeat any provision of this Act shaH, upon conviction, be punished by 
18 
a fine of not less than Twenty-five Thousand Pesos (P25,000.00) but not more than Fifty 
19 
Thousand Pesos (P50,000.00) and suffer imprisonment of not less than six (6) months but not 
20 
more than two (2) years. 
21 
b) In case of non-compliance with the provisions of Section 7 of this Act, the BSP shall 
22 
impose administrative sanctions and other pen'llties on the concerned lending institutions, 
23 
including a fine of not less than Five hundred thousand pesos (P500,000.00). 
24 
Penalties on noncompliance shaH be directed to the development of the MSME sector. 
25 
Ninety percent (90%) of the penalties collected should go to the MSMED Council Fund, while 
26 
the remaining ten percent (10%) should be .given to the BSP to cover for administrative 
27 
expenses. 
28 
Sec. 12. Separability Clause. - If any provision of this Act shall be held unconstitutional, 
29 
the remainder ofthe Act not otherwise affected shall remain in fuH force and effect. 
30 
Sec. 13. Repealing Clause. - Provisions of Republic Act No. 6977, as amended by 
31 
Republic Act No. 8289 and Republic Act No. 9501, Republic Act No. 9178, and all other 
32 
existing laws, presidential decrees, executive orders, proclamations or administrative regulations 
33 
that are inconsistent with the provisions of this Act are hereby amended, modified, superseded, 
34 
or repealed accordingly. 
35 
Sec. 14. Effectivity. - This Act shaH take effect fifteen (15) days after its publication in 
36 
the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved, 
mksbc