SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES —_)
First Regular Session )

HOUSE OF REPRESENTATIVES

introduced by Representative Rufus B. Rodriguez,
Representative Maximo B. Rodriguez, Jr., Representative Rolando A uy
Representative Peter M. Unabia, Representative Juliette T. Uy,
Representative Ma. Lourdes Acosta-Alba

4155

House Bill No,
EXPLANATORY NOTE

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 P3,000,000.00, a
small enterprise from P3,000,000.00 to P15,000,000.00, and a medium enterprise
from P15,000,000,00 to P100,000,000.00.

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 2014" seeks to further strengthen the MSME
sector by providing this sector with better incentives and benefits, granting 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 2014. 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
growth of our nation's economy.

| My

Rut Rodfiguez Maximo . Rodriguez

fa. Lourdes Acosta-Aiba



SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES —)
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez,
Representative Maximo B. Rodriguez, Jr., Representative Rolando A. Uy
Representative Peter M. Unabia, Representative Juliette T. Uy,
Representative Ma. Lourdes Acosta-Alba

House Bill No, 4155

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:

SECTION 1. Short Title. This Act shall be known as the "Go Negosyo Act of 2014".

SECTION 2. Declaration of Policy. - It is hereby declared the policy of the state to
foster national development and alleviate poverty by encouraging the establishment
of micro, small and medium enterprises (MSMEs) that generate local job creation
and production in the country.

The State shall do this by rationalizing existing bureaucratic regulations,
providing greater incentives and benefits to MSMEs, and strengthening the Micro,
Small and Medium Enterprise Development (MSMED) Council

SECTION 3. Micro, Small and Medium Enterprises (MSMEs). - MSMEs shall refer to
any business activity or enterprise engaged in the production, processing or
manufacturing of products or commodities, trading and services, whether single
proprietorship, cooperative, partnership or corporation whose total assets must have
value falling under the following categories

MICRO not more than: P3,000,000
SMALL P3,000,001 : P15,000,000
MEDIUM P15,000,001 . P100,000,000

The above classification of MSMEs shall be subject to review and adjustments by
the Micro, 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 concerned, taking into account inflation and other economic
indicators

The term "services" shall exclude those rendered by anyone, who is duly
licensed by the government after having passed a government licensure
examination, in connection with the exercise of one’s profession. The term "assets"
refers to all kinds of properties, real or personal, owned by the MSME, including
those arising from loans, and used for the conduct of its business as defined by the


MSMED Council: Provided, That for the purpose of exemption from taxes and fees
under this Act, this term shall mean all kinds of properties, real or personal, owned
and/or used by the MSME for the conduct of its business as defined by the MSMED
Council. Notwithstanding the plans and programs set for MSMEs, the Council shall
ensure that a set of policies, plans and programs shall be formulated and
implemented according to the specific and distinct needs of each category (micro,
small and medium) encouraging each level of enterprise to graduate to a higher
category.

SECTION 4. Eligibility. Any person, natural or juridical, or cooperative, or
association, having the qualifications as defined in Section 3 of this Act may apply for
registration as MSME.

SECTION 5, Registration and Fees. -

(@) Micro Enterprises. -The Office of the Treasurer of each city or municipality shall
Tegister the micro enterprise and issue a Certificate of Authority to enable the micro
enterprise to avail of the benefits under this Act. Any such application shall be
processed within fifteen (15) working days. Should the process, after application,
take more than 15 days, the micro enterprise shall be deemed registered and can
proceed with its operation unless revoked by the Local Government Unit (LGU). The
Municipal or City Mayor shall designate a Micro Enterprise Registration Officer who
shall be under the Office of the Treasurer. LGUs shall establish a One-Stop
Business Registration Center to handle the efficient registration and processing of
permits/licenses of the concerned enterprises. Likewise, LGUs shall make a periodic
evaluation of the micro enterprise's financial status for monitoring and reporting
purposes. To defray the administrative costs of registering and monitoring micro
enterprises, the LGUs may charge a fee not exceeding One Thousand Pesos
(P1,000.00). The Certificate of Authority to be issued by the LGU shall be effective
for a period of two (2) years, renewable every two (2) years.

(b) Small and Medium Enterprises (SME) - The Department of Trade and Industry
(DT), through its field offices, shall register the small and medium enterprises
(SMEs) and issue a Certificate of Authority to enable the SME to avail of the benefits
under this Act. Any such application shall be processed within fifteen (15) working
days. Should the process, after application, take more than 15 days, the SME shall
be deemed registered and can proceed with operations unless’ revoked by DTI. The
DTI shall designate a SME Registration Officer who shall be under the DTI field
office concerned. The DTI field offices shall establish a One-Stop-Business
Registration Center to handle the efficient registration and processing of
permits/licenses of concerned enterprises. Likewise, the DTI shall make a periodic
evaluation of the SME's financial status for monitoring and reporting purposes. To
defray the administrative costs of registering and monitoring the small and medium
enterprises, the DTI field office may charge a fee not exceeding Five Thousand
Pesos (P5,000.00). The Certificate of Authority to be issued by DTI shall be effective
for a period of two (2) years, renewable every two (2) years.

SECTION 6. Incentives and Benefits. -
(a) Micro Enterprises: The following incentives and benefits shall be made available
to registered micro enterprises:


1. Exemption from Income Tax. - All micro enterprises shall be exempt from the
payment of income tax with respect to income received from the operations of
the enterprise; and

2. Exemption from the Coverage of the Minimum Wage Law. - All micro
enterprises shall be exempt from the coverage of the Minimum Wage Law:
Provided, That all employees covered under this Act shall be entitled to the
same benefits given to any regular employee such as, among others, social
security and healthcare benefits

(b) Small and Medium Enterprises. - Registered small and medium enterprises which
shall hire additional employees subsequent to its registration under this Act, shall be
allowed a deduction from its gross income in the amount of Forty Thousand Pesos
(P40,000.00) for each new employee hired: Provided, That the maximum allowable
deduction from gross income shall not exceed One Hundred Twenty Thousand
Pesos (120,000.00): Provided, further, That the employment must be continuous
for a period of at least one (1) year: Provided, finally, That the incentive shall no
longer be applicable upon the termination of the employee. This incentive can only
be availed for a period of five (5) years from the effectivity of this Act.

(c) Micro, Small and Medium Enterprises. - In addition to the above incentives,
MSMEs shall be entitled to the following:

1. Exemption from Value-Added Tax (VAT) Registration and Percentage Tax. -
Registered MSMEs 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 (P3,000,000.00) shall not be required to be a VAT-
registered entity and shall likewise be exempt from the payment of percentage
tax under the National Internal Revenue Code, as amended. Should the
enterprise exceed the Three Million Pesos (P3,000,000.00) value, it shall no
longer be covered by this exemption on the following year,

2. Local Taxes and Fees for Micro Enterprises - LGUs shall not charge micro
enterprises any local tax and are encouraged to reduce the amount of
applicable fees and charges; and

3. Local Taxes and Fees for Small and Medium Enterprises. - LGUs are
encouraged either to reduce the amount of applicable local taxes, fees and
charges imposed or to exempt the small and medium enterprises from the
payment of local taxes, fees and charges.

SECTION 7. Composition of the Micro, Small and Medium Enterprise Development
Council (MSMED), - The Council shall be headed by the Secretary of Trade and
Industry as Chairman, and may elect from among themselves a Vice-chairman to
preside over the Council meetings in the absence of the Chairman. To ensure
greater representation by the sectors involved, the members of the Council shall be
the following

(a) Secretary of Agriculture;

(b) Secretary of the Interior and Local Government;

(©) Secretary of Science and Technology;

(d) Secretary of Tourism;

(e) Chairman of Small Business Corporation;


(f) Three (3) representatives from the micro enterprise sector to represent Luzon,
Visayas and Mindanao; to focus on the specific needs of micro enterprises.

(g) Three (3) representatives from the small and medium enterprise (SME) sector
to represent Luzon, Visayas and Mindanao; to focus on the specific needs of
small and medium enterprises

(h) One representative from the youth sector to focus on the promotion of youth
entrepreneurship;

(). One representative from the Microfinance Council;

()) One representative from the labor sector, to be nominated by accredited labor
groups; and

(W) A representative from the private banking sector: to serve alternately among
the Chamber of Thrift Banks; the Rural Bankers’ Association of the Philippines
(RBAP); Bankers! Association of the Philippines (BAP); and the Micro Finance
Council of the Philippines (MFCP)

SECTION 8. Functions Of MSMED Council. - In addition to the existing functions of
the council as stated in RA 9501 or the Magna Carta for Micro, Small and Medium
Enterprise, the following functions shall be added

(a) Development Planning. - MSMED Council shall prepare separate six-year
development plans for micro enterprises and for small and medium
enterprises (SMEs) to reflect a clear strategy for each sector for approval by
the President

(b) Promoting Value Chain Linkages - MSMED Council shall provide information
and matchmaking services for MSMEs and larger firms to bridge backward
and forward value chain linkages. It shall also coordinate flow of information
through national websites, business directories and business contact fairs and
events.

(©) Technical Assistance, - The MSMED Council shall develop programs to
provide awareness raising, capacity building and training for MSMEs to start
and grow their businesses. Assistance may be rendered to MSMEs regarding
financial management, marketing strategies, enhancement of business plans
and other necessary information to help the enterprise overcome business
difficulties

SECTION 9. Information Dissemination. - The Philippine Information Agency (PIA),
in coordination with DTI, SSP, Department of Labor and Employment (DOLE), and
DILG shall ensure the proper and adequate information dissemination of the
contents and benefits of this Act to the general public especially to its intended
beneficiaries specifically in the barangay level

SECTION 10. Annual Report. - The DTI, SSP, DOLE and DILG, shall submit an
annual report to Congress on the status of the implementation of this Act.

SECTION 11. Implementing Rules and Regulations. The Secretary of the
Department of Trade and Industry, in consultation with the Secretaries of the
Department of Interior and Local Government (DILG), Department of Finance (DOF),
Department of Labor and Employment (DOLE) and the Bangko Sentral ng Pilipinas,
(SSP) Governor shall formulate the necessary rules and regulations to implement
the provisions of this Act within ninety (90) days after its approval. The rules and


regulations issued pursuant to this Act shall take effect fifteen (15) days after its
publication in a newspaper of general circulation

SECTION 12. Penalties.-

(a) Any person who shall willfully violate any provision of this Act or who shall in any
manner commit any act to defeat any provision of this Act shall, upon conviction, be
punished by a fine of not less than Twenty-Five Thousand Pesos (P25,000,00) but
not more than Fifty Thousand Pesos (P50,000.00) and suffer imprisonment of not
less than six (6) months but not more than two (2) years.

(b) In case of non-compliance with the provisions of Section 7 of this Act, the BSP
shall impose administrative sanctions and other penalties on the concerned lending
institutions, including a fine of not less than Five Hundred Thousand Pesos
(P500,000.00). Penalties on noncompliance shall be directed to the development of
the MSME sector. Ninety percent (90%) of the penalties collected should go to the
MSMED Council Fund, while the remaining ten percent (10%) should be given to the
BSP to cover for administrative expenses.

SECTION 13. Repealing Clause - All laws, issuances, rules and regulations
inconsistent with any provision of this Act shall be deemed amended, modified, or
repealed accordingly.

SECTION 14. Separability Clause - If, for any reason, a provision or part hereof is
declared invalid or unconstitutional, the other provisions not affected thereby shall
remain in full force and effect.

SECTION 15. Effectivity - This Act shall take effect fifteen (15) days after its
publication in any newspaper of general circulation.

Approved,