FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
s.B.No.2843 
) 
) 
) 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
'11 
,JAN 20 
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One of the more serious problems besetting a developing nation such as the Philippines is 
a high unemployment rate, Official statistics as of October 2010 pegged the number of 
unemployed Filipinos to around 2.8 million, of which 80% or 2.3 million are between the ages of 
15t034. 
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 
government'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 783,000 micro, small and medium 
enterprises (MSMEs), which according to latest data comprise 99.7% of all business enterprises 
in the Philippines. 
Records show that in 2006, MSMEs employed a total of 3.3 million individuals, 
dwarfing that oflarge-scale industries which only generated 1.6 million jobs as of the same year. 
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 2011," this bill also aims to stimulate the growth of 
MSMEs by exempting them from certain strict government regulation that would otherwise 
discourage their proliferation. 
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 P5 million for micro 
enterprises; from P3,000,00 1 to P 15 million, the threshold amount for small enterprises is now 


from P5,OOO,OOI to Pl5 million; while it remained the same for medium enterprises, from 
PI5,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 
(VAT) registration and Percentage Tax for 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, MSMEs is probably the best way of generating much-needed employment 
in the country. It is therefore the responsibility of Congress to ensure their viability and 
continued growth. 
In view of the foregoing, the passage of this bill is sincerely sought. 


FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. B. NO. 2B<i3 
) 
) 
) 
Introduced by Senator Ralph G. Recto 
AN ACT 
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JAN 20 
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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 01'2011 ", 
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, 
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small and medium enterprises (MSMEs) which effectively serve as seedbeds of Filipino 
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entrepreneurial talents, and integrating those in the informal sector with the mainstream economy 
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through the active involvement of the government especially in the local level, the grant of 
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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 
PS,OOO,OOI 
PI5,000,001 
PS,OOO,OOO, 
PIS,OOO,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 (MSMED) 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 
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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 
25 
MSMED Council: Provided, That for the purpose of exemption from taxes and fees under this 
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1 
Act, this term shall mean all kinds of properties, real or personal, owned and/or used by the 
2 
MSME for the conduct of its business as defined by the MSMED Council. 
3 
Notwithstanding the plans and programs set for MSMEs, the Council shall ensure that a 
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set of policies, plans and programs shall be formulated and implemented according to the 
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specific needs of each sector, encouraging MSMEs to graduate to a higher category. 
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SEC. 4. Who are Eligible 10 Register. - Any person, natural or juridical, or cooperative, 
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or association, having the qualifications as defined in Section 3 of this Act may apply for 
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registration as MSME. 
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SEC. 5. Registration and Fees. -
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(a) Micro Enterprises. - The Office of the Treasurer of each city or municipality shall 
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register the micro enterprise and issue a Certificate of Authority to enable the micro enterprise to 
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avail of the benefits under this Act. Any such application shall be processed within fifteen (15) 
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working days upon submission of complete documents. Otherwise, the micro enterprise shall be 
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deemed registered. The Municipal or City Mayor may designate a Micro Enterprise Registration 
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Officer who shall be under the Office of the Treasurer. Local government units (LGUs) shall 
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establish a One-Stop-Business Registration Center to handle the efficient registration and 
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processing of permits/licenses of the concerned enterprises. Likewise, LGUs shall make a 
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periodic evaluation of the micro enterprise's financial status for monitoring and 
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reporting purposes. 
20 
To defray the administrative costs of registering and monitoring the micro enterprises, the 
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LGUs may charge a fee not exceeding One Thousand Pesos (PI ,000.00). The LGU shall then 
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issue a Certificate of Authority effective for a period of two (2) years, renewable every two (2) 
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years. 
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(b) Small and Medium Enterprises - The Department of Trade and Industry (DTI), through 
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its field offices, shall register the small and medium enterprises (SMEs) and issue a Certificate 
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of Authority to enable the SME to avail of the benefits under this Act. Any such application shall 
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be processed within fifteen (15) working days upon submission of complete documents. 
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Otherwise, the SME shall be deemed registered. The DTI may designate a SME Registration 
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Officer who shall be under the DTl field office concerned. The DTI field offices shall establish a 
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One-Stop-Business Registration Center to handle the efficient registration and processing of 
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permits/licenses of concerned enterprises. Likewise, the DTI shall make a periodic evaluation of 
32 
the SME's financial status for monitoring and reporting purposes. 
33 
To defray the administrative costs of registering and monitoring the micro enterprises, 
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the DTI field office may charge a fee not exceeding One Thousand Pesos (PI,OOO.OO). The DTI 
35 
shall then issue a Certificate of Authority effective for a period of two (2) years, renewable every 
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two (2) years. 
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SEC. 6. Incentives and Benefits. -
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A. Micro Enterprises: The following incentives and benefits shall be made available to 
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registered micro enterprises: 
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1. Exemption from Income Tax. - All micro enterprises shall be exempt from the payment 
4 
of income tax with respect to income received from the operations ofthe enterprise; and 
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2. Exemptionfrom the Coverage of the Minimum Wage Law. - All micro enterprises shall 
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be exempt from the coverage of the Minimum Wage Law: 
Provided, That all employees 
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covered under this Act shall be entitled to the same benefits given to any regular employee such 
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as, among others, social security and healthcare benefits. 
9 
B. Small and Medium Enterprises. - Registered small and medium enterprises which shall 
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hire additional employees subsequent to its registration under this Act, shall be allowed a 
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deduction from its gross income in the amount of Forty Thousand Pesos (P40,000.00) for each 
12 
new employee hired: Provided, That the maximum allowable deduction from gross income shall 
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not exceed Eighty Thousand Pesos (P80,000.00): Provided, further, That the employment must 
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be continuous for a period of at least one (1) year: Provided, finally, That the incentive shall no 
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longer be applicable upon the termination of the employee. 
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This incentive can only be availed offor a period of five (5) years from the effectivity of 
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this Act. 
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C. Micro, Small and Medium Enterprises. - In addition to the above incentives, MSMEs 
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shall be entitled to the following: 
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1. Exemptionfrom Value-Added Tax (VAT) Registration and Percentage Tax. - Registered 
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MSMEs whose annual gross selling price or gross value in money received from the sale, barter, 
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or exchange of goods, as well as the annual gross receipts derived from the sale or exchange of 
23 
services do not exceed Three Million Pesos (P3,000,000.00) shall not be required to be a VAT-
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registered entity and shall likewise be exempt from the payment of percentage tax under the 
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National Internal Revenue Code, as amended; and 
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2. Local Taxes and Fees. - Local Government Units are encouraged either to reduce the 
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amount of applicable local taxes, fees and charges imposed or to exempt the MSMEs from the 
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payment oflocal taxes, fees and charges. 
29 
SEC. 7. Mandatory Allocation of Credit Resources to Micro, Small and Medium 
30 
Enterprises. - For a period of ten (10) years from the date of the effectivity of this amendatory 
31 
Act, all lending institutions as defined under Bangko Sentral ng Pilipinas rules, whether public or 
32 
private, shall set aside at least eight percent (8%) for micro, small and medium enterprises of 
33 
their total loan portfolio based on their balance sheet as of the end of the previous quarter, and 
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make it available for MSME credit as provided under Sec. 15 of Republic Act No. 6977, as 
35 
amended. 
36 
Any existing laws to the contrary notwithstanding, interests, commissions and discounts 
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derived from the loans by any lending institutions granted to MSMEs under this Act shall be 
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exempt from gross receipts tax (GRT). 
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SEC. 8. Information Dissemination. - The Philippine Information Agency (PIA), in 
2 
coordination with DTI, BSP, Department of Labor and Employment (DOLE), and DILG shall 
3 
ensure the proper and adequate information dissemination of the contents and benefits of this Act 
4 
to the general public especially to its intended beneticiaries specifically in the barangay level. 
5 
SEC. 9. Annual Report. - The DTI, BSP, DOLE and DILG, shall submit an annual report 
6 
to Congress on the status of the implementation of this Act. 
7 
SEC. 10. Implementing Rules and Regulations. - The Secretary of the Department of 
8 
Trade and Industry, in consultation with the Secretaries of DILG, DOF, DOLE and BSP 
9 
Governor shall formulate the necessary rules and regulations to implement the provisions of this 
10 
Act within ninety (90) days after its approval. The rules and regulations issued pursuant to this 
11 
Act shall take effect fifteen (15) days after its publication in a newspaper of general circulation. 
12 
SEC. 11. Penalties. -
13 
a) Any person who shall willfully violate any provision of this Act or who shall in any 
14 
manner commit any act to defeat any provision of this Act shall, upon conviction, be punished by 
15 
a fine of not less than Twenty-five Thousand Pesos (P25,000.00) but not more than Fifty 
16 
Thousand Pesos (P50,000.00) and suffer imprisonment of not less than six (6) months but not 
17 
more than two (2) years. 
18 
b) In case of non-compliance with the provisions of Section 7 of this Act, the BSP shall 
19 
impose administrative sanctions and other penalties on the concerned lending institutions, 
20 
including a fine of not less than Five hundred thousand pesos (P500,000.00). 
21 
Penalties on noncompliance shall be directed to the development of the MSME sector. 
22 
Ninety percent (90%) of the penalties collected should go to the MSMED Council Fund, while 
23 
the remaining ten percent (10%) should be given to the BSP to cover for administrative 
24 
expenses. 
25 
SEC. 12. Separability Clause. -
If any provision of this Act shall be held 
26 
unconstitutional, the remainder of the Act not otherwise affected shall remain in full force and 
27 
effect. 
28 
SEC. 13. Repealing Clause. - Provisions of Republic Act No. 6977, as amended by 
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Republic Act No. 8289 and Republic Act No. 9501, Republic Act No. 9178, and all other 
30 
existing laws, presidential decrees, executive orders, proclamations or administrative regulations 
31 
that are inconsistent with the provisions of this Act are hereby amended, modified, superseded, 
32 
or repealed accordingly. 
33 
SEC. 14. Effectivity. - This Act shall take effect fifteen (15) days after its publication in 
34 
the Official Gazette or in at least two (2) newspapers of general circulation. 
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