SIXTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
SENATE 
Senate Bill No. 1028 
111 
Introduced by: Senator Paolo Benigno "Bam" A. Aquino IV 
EXPLANATORY NOTE 
'13 JUL?2 
Micro, small, 
and 
medium enterprises (MSMEs) 
are 
defined 
as 
any business 
activity/enterprise engaged in industry, agri-business/services, whether single proprietorship, 
cooperative, partnership, or corporation whose total assets, inclusive of those arising from 
loans but exclusive of the land on which the particular business entity's office, plant and 
equipment are situated, must have value falling under the following categories: a micro 
enterprise has an asset value of up to PHP3,000,000.00, a small enterprise from 
PHP3,000,00l.00 to PHP15,000,000.00, and a medium enterprise from PHP15,000,001.00 to 
PHP100,OOO,OOO.OO. 
These industries may be small in scale, but have a mighty impact on our nation's economic 
development. They bring vast contributions by way of rural industrialization; rural development 
and decentralization of industries; creation of employment opportunities and more equitable 
income distribution; use of indigenous resources; earning of foreign exchange resources; 
creation of backward and forward linkages with existing industries; and entrepreneurial 
development. 
A nation like ours has a plentiful and high-quality labor pool. MSMEs by nature are labor-
intensive and thus the industry has so much to offer in generating jobs for our countrymen 
especially in the locality where they are situated. In this sense, they bring about a more 
balanced economic growth and equity in income distribution. MSMEs are oftentimes the roots 
from where great ideas, skills, and innovations spring forth, as scarce resources and the need to 
compete provide a challenge in the market. 
Thus the "Go Negosyo Act of 2013" seeks to further strengthen the MSME sector by 
providing this sector with better incentives and benefits, gra"nting more access to focused 
support for enhanced business performance, promoting support to key growth industries, and 
facilitating financing support programs that are much-needed for growth. Further, the Act 
promotes more participation from the private sector in the MSME Development Council. 
MSMEs have an important socioeconomic role in our nation's machinery. Unemployment 
numbers are growing, and we have to realize that allocating effort and resources towards a 
strong and thriving MSME sector not only sustains, but also leads to the creation of 
considerable net employment. 
Thus the legislature is urged to pass the Go Negosyo Act of 2013. Ultimately, this Act can 
help improve the design and implementation of the nation's MSME sector. This has the 
potential to assist MSMEs to integrate themselves in the formal economic market, which will 
bring forth more job opportunities and the enhanced gro 
of our o:.n's ec::r 
Senato 
0 Benigno :Bffr1:{.Quino IV 


SIXTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENAT~ 
S.B.No. 
~028 
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Introduced by: Senator Paolo Benigno "Bam" A. Aquino IV 
AN ACT 
PROMOTING THE REDUCTION OF POVERTY THROUGH THE DEVELOPMENT OF MICRO, SMALL 
AND MEDIUM ENTERPRISES 
Be it enacted by the Senate'and House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. Short Title. This Act shall be known as the "Go Negosyo Act of 2013." 
2 
SECTION 2. Declaration of Policy. - It is hereby declared the policy of the state to foster national 
3 
development and alleviate poverty by encouraging the establishment of micro, small and 
4 
medium enterprises (MSMEs) that generate local job creation and production in the country. 
5 
The State shall do this by rationalizing existing bureaucratic regulations, providing greater 
6 
incentives and benefits to MSMEs, and strengthening the Micro, Small and Medium Enterprise 
7 
Development (MSMED) Council. 
8 
SECTION 3. Micro, Small and Medium Enterprises (MSMEs). - MSMEs shall refer to any business 
9 
activity or enterprise engaged in the production, processing or manufacturing of products or 
10 
commodities, trading and services, whether single proprietorship, cooperative, partnership or 
11 
corporation whose total assets must have value falling under the following categories: 
12 
MICRO 
not more than 
Php 3,000,000 
13 
SMALL 
Php 3,000,001 
Php 15,000,000 
14 
MEDIUM 
Php 15,000,001 
Php 100,000,000 
15 
The above classification of MSMEs shall be subject to review and adjustments by the Micro, 
16 
Small and Medium Enterprises Development (MSMED) Council created under Section 6 of 


1 
Republic Act 6977, as amended, or upon the recommendation of sectoral organizations 
2 
concerned, taking into account inflation and other economic indicators. 
3 
The term "services" shall exclude those rendered by anyone, who is duly licensed by the 
4 
government after having passed a government licensure examination, in connection with the 
5 
exercise of one's profession. The term "assets" refers to all kinds of properties, real or personal, 
6 
owned by the MSME, including those ariSing from loans, and used for the conduct of its 
7 
business as defined by the MSMED Council: Provided, That for the purpose of exemption from 
8 
taxes and fees under this Act, this term shall mean all kinds of properties, real or personal, 
9 
owned and/or used by the MSME for the conduct of its business as defined by the MSMED 
10 
Council. Notwithstanding the plans and programs set for MSMEs, the Council shall ensure that a 
11 
set of policies, plans and programs shall be formulated and implemented according to the 
12 
specific and distinct needs of each category (micro, small and medium) encouraging each level 
13 
of enterprise to graduate to a higher category. 
14 
SECTION 4. Eligibility. Any person, natural or juridical, or cooperative, or association, having 
15 
the qualifications as defined in Section 3 of this Act may apply for registration as MSME. 
16 
SECTION 5. Registration and Fees. -
17 
(a) Micro Enterprises. - The Office of the Treasurer of each city or municipality shall register the. 
18 
micro enterprise and issue a Certificate of Authority to enable the micro enterprise to avail of 
19 
the benefits under this Act. Any such application shall be processed within fifteen (15) working 
20 
days. Should the process, after application, take more than 15 days, the micro enterprise shall 
21 
be deemed registered and can proceed with its operation unless revoked by the Local 
22 
Government Unit (LGU). The Municipal or City Mayor shall designate a Micro Enterprise 
23 
Registration Officer who shall be under the Office of the Treasurer. LGUs shall establish a One-
24 
Stop-Business Registration Center to handle the efficient registration and processing of 
25 
permits/licenses of the concerned enterprises. Likewise, LGUs shall make a periodic evaluation 
26 
of the micro enterprise's financial status for monitoring and reporting purposes. To defray the 
27 
administrative costs of registering and monitoring micro enterprises, the LGUs may charge a fee 
2 


1 
not exceeding One Thousand Pesos (Pi,OOO.OO). The Certificate of Authority to be issued by the 
2 
LGU shall be effective for a period oftwo (2) years, renewable every two (2) years. 
3 
(b) Small and Medium Enterprises (SME) - The Department of Trade and Industry (DTI), through 
4 
its field offices, shall register the small and medium enterprises (SMEs) and issue a Certificate of 
5 
Authority to enable the SME to avail of the benefits under this Act. Any such application shall 
6 
be processed within fifteen (15) working days. Should the process, after application, take more 
7 
than 15 days, the SME shall be deemed regist"ered and can proceed with operations unless' 
8 
revoked by DTI. The DTI shall designate a SME Registration Officer who shall be under the DTI 
9 
field office concerned. The DTI field offices shall establish a One-Stop-Business Registration 
10 
Center to handle the efficient registration and processing of permits/licenses of concerned 
11 
enterprises. Likewise, the DTI shall make a periodic evaluation of the SME's financial status for 
12 
monitoring and reporting purposes. To defray the administrative costs of registering and 
13 
monitoring the small and medium enterprises, the DTI field office may charge a fee not 
14 
exceeding One Thousand Pesos (P5,OOO.OO). The Certificate of Authority to be issued by DTI 
15 
shall be effective for a period of two (2) years, renewable every two (2) years. 
16 
SECTION 6.lncentives and Benefits. -
17 
(a) Micro Enterprises: The following incentives and benefits shall be made available to 
18 
registered micro enterprises: 
19 
1. Exemption from Income Tax. - All micro enterprises shall be exempt from the payment 
20 
of income tax with respect to income received from the operations of the enterprise; 
21 
and 
22 
2. Exemption from the Coverage of the Minimum Wage Law. - All micro enterprises shall 
23 
be exempt from the coverage of the Minimum Wage Law: Provided, That all employees 
24 
covered under this Act shall be entitled to the same benefits given to any regular 
25 
employee such as, among others, social security and healthcare benefits. 
3 


1 
(b) Small and Medium Enterprises. - Registered small and medium enterprises which shall 
2 
hire additional employees subsequent to its registration under this Act, shall be allowed 
3 
a deduction from its gross income in the amount of Forty Thousand Pesos (P40,OOO.OO) 
4 
for each new employee hired: Provided, That the maximum allowable deduction from 
5 
gross income shall not exceed One Hundred Twenty Thousand Pesos (P120,OOO.OO): 
6 
Provided, further, That the employment must be continuous for a period of at least one 
7 
(1) year: Provided, finally, That the incentive shall no longer be applicable upon the 
8 
termination of the employee. This incentive can only be availed for a period of five (5) 
9 
years from the effectivity of this Act. 
10 
(c) Micro, Small and Medium Enterprises. - In addition to the above incentives, MSMEs shall 
11 
be entitled to the following: 
12 
1. Exemption from Value-Added Tax (VAT) Registration and Percentage Tax. - Registered 
13 
MSMEs whose annual gross selling price or gross value in money received from the sale, barter, 
14 
or exchange of goods, as well as the annual gross receipts derived from the sale or exchange of 
15 
services do not exceed Three Million Pesos (P3,OOO,OOO.OO) shall not be required to be a VAT-
16 
registered entity and shall likewise be exempt from the payment of percentage tax under the 
17 
National Internal Revenue Code, as amended. Should the enterprise exceed the Three Million 
18 
Pesos (P3,OOO,OOO.OO) value, it shall no longer be covered by this exemption on the following 
19 
year; and 
20 
2. Local Taxes and Fees for Micro Enterprises - LGUs shall not charge micro enterprises 
21 
any local tax and are encouraged to reduce the amount of applicable fees and charges. 
22 
3. Local Taxes and Fees for Small and Medium Enterprises. - LGUs are encouraged either 
23 
to reduce the amount of applicable local taxes, fees and charges imposed or to exempt the 
24 
small and medium enterprises from the payment of local taxes, fees and charges. 
25 
SECTION 7. Composition of the Micro, Small and Medium Enterprise Development Council 
26 
(MSMED).- The Council shall be headed by the Secretary of Trade and Industry as Chairman, 
27 
and may elect from among themselves a Vice-chairman to preside over the Council meetings In 
4 


1 
the absence of the Chairman. To ensure greater representation by the sectors involved, the 
2 
members of the Council shall be the following: 
3 
(a) Secretary of Agriculture; 
4 
(b) Secretary of the Interior and Local Government; . 
5 
(c) Secretary of SCience and Technology; 
6 
(d) Secretary of Tourism; 
7 
(e) Chairman of Small Business Corporation; 
8 
(f) Three (3) representatives from the micro enterprise sector to represent Luzon, 
9 
Visayas and Mindanao; to focus on the specific needs of micro enterprises. 
10 
(g) Three (3) representatives from the small and medium enterprise (SME) sector to 
11 
represent Luzon, Visayas and Mindanao; to focus on the specific needs of small and 
12 
medium enterprises. 
13 
(h) One representative from the youth sector to focus on the promotion of youth 
14 
entrepreneurship; 
15 
(i) One representative from the Microfinance Council; 
16 
(j) One representative from the labor sector, to be nominated by accredited labor 
17 
groups; and 
18 
(k) A representative from the private banking sector: to serve alternately among the 
19 
Chamber of Thrift Banks; the Rural Bankers' Association of the Philippines (RBAP);. 
20 
Bankers' Association of the Philippines (BAP); and the Micro Finance Council of the 
21 
Philippines (MFCP). 
5 


1 
SECTION 8. FUNCTIONS OF MSMED Council. - In addition to the existing functions of the council 
2 
as stated in RA 9501 or the Magna Carta for Micro, Sma II and Medium Enterprise, the following 
3 
functions shall be added: 
4 
(a) Development Planning. - MSMED Council shall prepare separate six-year development 
5 
plans for micro enterprises and for small and medium enterprises (SMEs) to reflect a 
6 
clear strategy for each sector for approval by the President. 
7 
(b) Promoting Value Chain Linkages -
MSMED Council shall provide information and 
8 
matchmaking services for MSMEs and larger firms to bridge backward and forward 
9 
value chain linkages. It shall also coordinate flow of information through national 
10 
websites, business directories and business contact fairs and events. 
11 
(c) Technical Assistance. -
The MSMED Council shall develop programs to provide 
12 
awareness raising, capacity building and training for MSMEs to start and grow their 
13 
businesses. Assistance may be rendered to MSMEs regarding financial management, 
14 
marketing strategies, enhancement of business plans and other necessary information 
15 
to help the enterprise overcome business difficulties. 
16 
SECTION 9. In/ormotion Dissemination. - The Philippine Information Agency (PIA), in 
17 
coordination with DTI, SSP, Department of Labor and Employment (DOLE), and DILG shall 
18 
ensure the proper and adequate information dissemination of the contents and benefits of this 
19 
Act to the general public especially to its intended beneficiaries specifically in the barangay 
20 
level. 
21 
SECTION 10. Annual Report. - The DTI, SSP, DOLE and DILG, shall submit an annual report to 
22 
Congress on the status of the implementation of this Act. 
23 
SECTION 11. Implementing Rules ond Regulations.- The Secretary of the Department of Trade 
24 
and Industry, in consultation with the Secretaries of the Department of Interior and Local 
25 
Government (DILG), Department of Finance (DOF), Department of Labor and Employment 
26 
(DOLE) and the Sangko Sentral ng Pilipinas (SSP) Governor shall formulate the necessary rules 
6 


I 
and regulations to implement the provisions of this Act within ninety (90) days after its 
2 
approval. The rules and regulations issued pursuant to this Act shall take effect fifteen (15) days 
3 
after its publication in a newspaper of general circulation. 
4 
SECTION 12. Penalties.-
5 
(a) Any person who shall willfully violate any provision of this Act or who shall in any manner 
6 
commit any act to defeat any provision of this Act shall, upon conviction, be punished by a fine 
7 
of not less than Twenty-Five Thousand Pesos (P2S,000.00) but not more than Fifty Thousand 
8 
Pesos (PSO,OOO.OO) and suffer imprisonment of not less than six (6) months but not more than 
9 
two (2) years. 
10 
(b) In case of non-compliance with the provisions of Section 7 of this Act, the BSP shall impose 
II 
administrative sanctions and other penalties on the concerned lending institutions, including a 
12 
fine of not less than Five Hundred Thousand Pesos (PSOO,OOO.OO). Penalties on noncompliance 
13 
shall be directed to the development of the MSME sector. Ninety percent (90%) of the penalties 
14 
collected should go to the MSMED Council Fund, while the remaining ten percent (10%) should 
IS 
be given to the BSP to cover for administrative expenses. 
16 
SECTION 13. Separability Clause. - If any provision of this Act shall be heldunconstitutional, the 
17 
remainder of the Act not otherwise affected shall remain in full force and effect. 
18 
SECTION 14. Repealing Clause. - Provisions of Republic Act No. 6977, as amended by Republic 
19 
Act No. 8289 and Republic Act No. 9501, Republic Act No. 9178, and all other existing laws, 
20 
presidential decrees, executive orders, proclamations or administrative regu,lations that are. 
21 
inconsistent with the provisions of this Act are hereby amended, modified, superseded, or 
22 
repealed accordingly. 
23 
SECTION 15. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the 
24 
Official Gazette or in at least two (2) newspapers of general circulation. 
7