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Republic of the Philippines 
 
HOUSE OF REPRESENTATIVES 
Quezon City 
19th CONGRESS 
First Regular Session 
HOUSE BILL NO.  ____ 
________________________________________________________________________ 
Introduced by REP. BERNADETTE “DETTE” G. ESCUDERO 
________________________________________________________________________ 
AN ACT 
PROMOTING BUSINESS GROWTH AND RECOVERY BY REDUCING THE COST 
OF 
BUSINESS 
COMPLIANCE 
FOR 
MICRO, 
SMALL 
AND 
MEDIUM 
ENTERPRISES, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED 
 EXPLANATORY NOTE 
The Micro, Small and Medium Enterprise (MSME) sector is one of the primary drivers 
of economic growth. The preliminary MSME Data from the Philippine Statistics Authority 
revealed that in 2021, some 99.6% of the 1,080,638 establishments in the country are classified 
as MSMEs. In 2020, the sector generated 63% of the total establishment-based employment 
and about 36% of all value of goods and services produced in the country. Additionally, their 
distribution across industrial sectors and geographic locations enables them to stimulate 
economic activities outside traditional urban centers, thus aiding government efforts to 
redistribute wealth, reduce poverty incidence, and develop the Philippine countryside.  
Despite its pivotal role in the economy, factors such as the escalating cost of doing 
business, restricted access to financing and markets, and declining productivity and efficiency 
are impeding the development of the MSME sector. With limited resources and capabilities, 
many MSMEs are not adequately equipped to respond to the challenges and opportunities 
posed by domestic and international markets. This is particularly true during the height of the 
coronavirus pandemic in 2020, where the number of MSME establishments and their level of 
employment declined by 42,776 and 129,945, respectively.  
To develop an MSME sector capable of contributing to the country’s economic and 
social development, this bill seeks to improve the sector’s competitiveness by reducing the 
compliance cost of tax regulations. First, it seeks to make the optional tax on gross sales or 
receipts introduced under Republic Act No. 10963, or the Tax Reform for Acceleration and 
Inclusion (TRAIN) Law, more appealing to MSMEs by reducing the tax rate from eight percent 
(8%) to five percent (5%) of gross sales or receipts. Second, the bill seeks to simplify the 
convoluted rates under the creditable withholding tax system by reducing the rates to be used 
to two: one percent (1%) for the purchase of goods and properties, and two percent (2%) for 
the purchase of services. 
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Through these twin interventions, it is hoped that MSMEs would be afforded additional 
funds to expand business operations, recruit additional manpower, and mitigate inflation of 
business inputs, which in turn could facilitate growth and development of all Filipinos.  
In view of the foregoing, the approval of this measure is earnestly sought. 
    BERNADETTE “DETTE” G. ESCUDERO 


Republic of the Philippines 
 
HOUSE OF REPRESENTATIVES 
Quezon City 
19th CONGRESS 
First Regular Session 
HOUSE BILL NO.  ____ 
_______________________________________________________________________ 
Introduced by REP. BERNADETTE “DETTE” G. ESCUDERO 
_______________________________________________________________________ 
AN ACT 
PROMOTING BUSINESS GROWTH AND RECOVERY BY REDUCING THE COST 
OF 
BUSINESS 
COMPLIANCE 
FOR 
MICRO, 
SMALL 
AND 
MEDIUM 
ENTERPRISES, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled:
Section 1. Section 24 of the National Internal Revenue Code of 1997, as amended, is 
hereby further amended to read as follows: 
“SEC. 24. Income Tax Rates. – 
“(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien 
of the Philippines. – 
 “(1) xxx 
“(2) Rates of Tax on Taxable Income of Individuals. - The tax shall be computed 
in accordance with and at the rates established in the following schedule: 
“(a) xxx 
“(b) Rate of Tax on Income of Purely Self-employed Individuals and/or 
Professionals Whose Gross Sales or Gross Receipts and Other Non-Operating Income 
Does Not Exceed the Value-added Tax (VAT) Threshold as Provided in Section 
[109(BB)] 109(CC). – Self-employed individuals and/or professionals shall have the 
option to avail of [an eight percent (8%)] A FIVE PERCENT (5%) tax on gross sales 
or gross receipts and other non-operating income in excess of Two hundred fifty 
thousand pesos (P250,000) in lieu of the graduated income tax rates under Subsection 
(A)(2)(a) of this Section and the percentage tax under Section 116 of this Code. 
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“(c) Rate of Tax for Mixed Income Earners. – Taxpayers earning both 
compensation income and income from business or practice of profession shall be 
subject to the following taxes: 
“(1) All Income from Compensation. – The rate prescribed under Subsection 
(A)(2)(a) of this Section. 
“(2) All Income from Business or Practice of Profession. – 
“(a) If Total Gross Sales and/or Gross Receipts and Other Non-Operating 
Income Do Not Exceed the VAT Threshold as Provided in Section [109(BB)] 109(CC) 
of this Code. – The rates prescribed under Subsection (A)(2)(a) of this Section on 
taxable income, or [eight percent (8%)] FIVE PERCENT (5%) income tax based on 
gross sales or gross receipts and other non-operating income in lieu of the graduated 
income tax rates under Subsection (A)(2)(a) of this Section and the percentage tax under 
Section 116 of this Code. 
“xxx” 
Sec. 2. Section 57 of the National Internal Revenue Code of 1997, as amended is hereby 
further amended to read as follows: 
“SEC. 57. Withholding of Tax at Source. –  
“(A) xxx 
“(B) Withholding of Creditable Tax at Source. – The Secretary of Finance may, 
upon the recommendation of the Commissioner, require the withholding of a tax on the 
items of income payable to natural or juridical persons, residing in the Philippines, by 
payor-corporation/persons as provided for by law, at the rate of [not less than one 
percent (1%) but not more than thirty-two percent (32%) thereof, which shall be 
credited against the income tax liability of the taxpayer for the taxable year: Provided, 
That beginning January 1, 2019, the rate of withholding shall not be less than one 
percent (1%) but not more than fifteen percent (15%) of the income payment.] ONE 
PERCENT (1%) FOR THE PURCHASE OF GOODS AND PROPERTIES, AND 
TWO PERCENT (2%) FOR THE PURCHASE OF SERVICES INCLUDING 
THE EXERCISE OF PROFESSION AND LEASE OF PROPERTIES, WHICH 
SHALL BE CREDITED AGAINST THE INCOME TAX LIABILITY OF THE 
TAXPAYER FOR THE TAXABLE YEAR. 
“xxx” 
Sec. 3. Implementing Rules and Regulations (IRR). – Within thirty (30) days from the 
effectivity of this Act, the Department of Finance shall, in coordination with the Bureau of 


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Internal Revenue, promulgate the rules and regulations to effectively implement the provisions 
of this Act. 
Sec. 4. Separability Clause. – If any provision or part hereof is declared 
unconstitutional, the remainder of this Act or any provision not affected thereby shall remain 
in full force and effect. 
Sec. 5. Repealing Clause. – All laws, acts, decrees, executive orders, issuances, and 
rules and regulations or parts thereof which are contrary to and inconsistent with this Act are 
hereby repealed, amended or modified accordingly. 
Sec. 6. Effectivity. – This Act shall take effect fifteen (15) days after its complete 
publication in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved,