Republic of the Philippines

Soc 204

HOUSE OF REPRESENTATIVES { 20 PM
Pa
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Quezon City, Metro Manila E:

Sixteenth Congress ;
Second Regular Session SNE

House Bill No. 5092

Introduced by Honorable Roy M. Loyola

EXPLANATORY NOTE

Well enshrined in our Constitution are policies that are geared towards
alleviating the plight of our less fortunate brethren as well as promoting equality and
uniformity in the application of our laws, to wit

“The State shall promote a just and dynamic social order that will
ensure the prosperity and independence of the nation and free the
people from poverty through policies that provide adequate social
services, promote full employment, a rising standard of living, and
an improved quality of life for all’; (Section 9, Article II) and,

“The rule of taxation shall be uniform and equitable. The Congress

shall evolve a progressive system of taxation.” (Section 28(1),
Article VI) (Emphasis supplied.)

Anchored on said Constitutional precepts, this bill seeks to ease the burden
of marginalized income eamers (MIEs) in our society. MIEs, as defined under
Revenue Regulation (RR) No. 7-2012 and clarified under Revenue Memorandum
Circular (RMC) No. 7-2014, are those individuals not deriving compensation as an
employee under an employer-employee relationship and are self-employed and
deriving gross sales or receipts not exceeding One hundred thousand pesos
(P100,000.00) in any 12-month period. Included in this definition are sari-sari store
‘owners, fisher folks, farmers, vendors and those similarly situated. Moreover, said
RMC emphasized that licensed professionals, consultants, artists, sales agents,
brokers and others similarly situated are not to be considered as MIEs.

‘The Bureau of Internal Revenue (BIR) issued last 5 February 2014 said RMC
No, 7-2014, which clarified the issues on the registration and tax compliance
requirements of MIEs pursuant to RR No. 7-2012. These requirements under said
RMC include (1) registration with the Bureau using BIR Form 1901, (2) exemption
from payment of Annual Registration Fee, (3) registration of books of accounts, (4)


issuance of registered principal receipts/sales invoices, (5) filing and payment of
Annual Income Tax Return, and (6) exemption from payment of business taxes.

As the requirements of the above RMC seem to be onerous on the part of
these MIEs, it is the intention of this bill to remove this burden from the shoulder of
‘our marginal earners by providing for their exemption from the payment of income
taxes, value-added taxes and percentage taxes. Additionally, this bill also seeks to
amend the National Internal Revenue Code (NIRC) by exempting MIEs from the
payment of the annual registration fee under Section 236 thereof, and by including
MIEs in the list of individuals not required to file an income tax return as provided
under Section 51 (A)(2).

In addition to the above proposed amendments, this bill also aims to raise the
threshold of the total gross sales/receipts of MIEs or their “income cap" to one
hundred fifty thousand pesos (P150,000.00) during any 12-month period. Said
income cap shall likewise be indexed to the annual rate of inflation. This adjustment
shall be made in order to make this proposed measure reflective of the changing
times and responsive to the needs of the MIEs in the years to come.

With the passage of this bill, it is hoped that it could help the lives of our
simple farmers, fisherfolk, small sari-sari or carinderia owners, and tricycle
operators/drivers by protecting them from fiscal policies that are too burdensome for
them to bear,

Hence, early approval of this bill is earnestly prayed.

YY M. LOYOLA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Sixteenth Congress
First Regular Session

5092

House Bill No.
Introduced by Honorable Roy M. Loyola

AN ACT
EXEMPTING MARGINAL INCOME EARNERS FROM INCOME TAX, VALUE
ADDED TAX AND OTHER PERCENTAGE TAXES, AMENDING FOR THE
PURPOSE SECTIONS 22, 24, 61, 109 (1) AND 236 OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER
PURPOSES

Be it enacted by the House of Representatives and the Senate of the
Philippines in Congress assembled:

SECTION 1. Section 22 of Republic Act No. 8424, as amended, otherwise
known as the National Internal Revenue Code of 1997, is hereby further amended
by adding the following definition after Subsection (HH) to read as follows:

"SEC. 22. Definitions. - When used in this Title:

AX XX”

XXX
"(HH) x xx

“(!) “THE TERM ‘MARGINAL INCOME EARNER’ SHALL REFER
TO AN INDIVIDUAL WHO IS NOT DERIVING COMPENSATION AS
AN EMPLOYEE UNDER AN EMPLOYER-EMPLOYEE
RELATIONSHIP EITHER IN THE PRIVATE OR PUBLIC SECTOR
BUT ONE WHO IS SELF-EMPLOYED ENGAGED IN ACTIVITIES
PRINCIPALLY FOR SUBSISTENCE OR LIVELIHOOD DERIVING
GROSS SALES/RECEIPTS NOT EXCEEDING ONE HUNDRED
FIFTY THOUSAND PESOS (P150,000.00) DURING ANY 12-MONTH
PERIOD.”

“(JJ) THE TERM ‘INCOME CAP’ SHALL REFER TO THE
THRESHOLD AMOUNT OF ONE HUNDRED FIFTY THOUSAND
PESOS (P150,000.00).


Sec. 2.The income cap on the gross sales or receipts of the marginal income
earners defined under this Act shall be increased by three percent (3%) every year
thereafter effective January 2016 through revenue regulations issued by the
Secretary of Finance.

Sec. 3. Section 24 (A) of Republic Act No. 8424, as amended, otherwise
known as the National Internal Revenue Code of 1997, is hereby further amended to
read as follows:

"Section 24. Income Tax Rates. ~

(A) Rates of Income Tax on Individual Citizen and Individual Resident
Alien of the Philippines. -

"(1) x00"

"(Q) xxx"

xxx’

“Provided, That minimum wage earners as defined in Section 22 (HH)
of this Code shall be exempt from the payment of income tax on their
taxable income; Provided, further, That the holiday pay, overtime pay,
night shift differential pay and hazard pay received by such minimum
wage earners shall likewise be exempt from income tax.

“IN THE CASE OF MARGINAL INCOME EARNERS AS DEFINED
UNDER SECTION 22 (II) OF THIS CODE, ALL INCOME DERIVED
FROM THEIR PRINCIPAL SOURCE OF LIVELIHOOD SHALL ALSO
BE EXEMPT FROM INCOME TAX.”

Sec. 4.Section 109 (1) of Republic Act No. 8424, as amended, otherwise
known as the National Internal Revenue Code of 1997, is hereby further amended to
read as follows:

“Section 109. Exempt Transactions.- (1) Subject to the provisions of
‘Subsection (2) hereof, the following transactions shall be exempt from
the value-added tax:

MA) XXX
"XX

"(W) Sale or lease of goods or properties or the performance of
services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not exceed the
amount of One milion five hundred thousand pesos (PI,500,000):
Provided, That not later than January 31, 2009 and every three (3)
years thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index, as published by the
National Statistics Office (NSO);


"(X) SALE OR LEASE OF GOODS AND SALE OF SERVICES BY
MARGINAL INCOME EARNERS WHOSE GROSS SALES OR
RECEIPTS DERIVED FROM THEIR PRINCIPAL SOURCE OF
LIVELIHOOD DO NOT EXCEED ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00): PROVIDED, THAT NOT LATER
THAN JANUARY 1, 2016 AND EVERY YEAR THEREAFTER, THE
AMOUNT HEREIN STATED SHALL BE ADJUSTED BY 3%
THROUGH REVENUE REGULATIONS TO BE ISSUED BY THE

‘SECRETARY OF FINANCE.”

“x

Sec. 8.Section 51 (A)(2)(d) of Republic Act No. 8424, as amended, otherwise
known as the National Internal Revenue Code of 1997, is hereby further amended to
read as follows:

“Sec. 51. Individual Return. ~

“(A) Requirements, —

“(1) 0

“(a) xx

Ox,

*(2) v090«

“(a) x0

“SOx

“(d) A minimum wage earner as defined in Section 22(HH) AS WELL
AS A MARGINAL INCOME EARNER DEFINED UNDER SECTION

22{IN)of this Code, or [an] ANY OTHER individual who is exempt from
income tax pursuant to the provisions of this Code and other laws,

general or special.”

Sec. 6.Section 116 of Republic Act No. 8424, as amended, otherwise
known as the National Internal Revenue Code of 1997, is hereby further
amended to read as follows:

“Sec. 116. Tax on Persons Exempt from Value-added Tax (VAT). —
Any person whose sales or receipts are exempt under Section 109(V)
of this Code from the payment of value-added tax and who is not a
VAT-registered person shall pay a tax equivalent to three percent
(3%) of his gross quarterly sales or receipts: Provided, That


MARGINAL INCOME EARNERS AND cooperatives shall be exempt
from the three percent (3%) gross receipts tax herein imposed.”

Sec. 7.Section 236 (B) of Republic Act No. 8424, as amended,
otherwise known as_ the National Internal Revenue Code of 1997, is hereby
further amended to read as follows:

“Section 236. Registration Requirements. ~

MA) XXX

“(8) Annual Registration Fee. - An annual registration fee in the
amount of Five hundred pesos (P500) for every separate or distinct
establishment of place of business, including facility types where sales
transactions occur, shall be paid upon registration and every year
thereafter on or before the last day of January; Provided, however,
That cooperatives, individuals earning purely compensation income
whether locally or abroad, MARGINAL INCOME EARNERS, and
overseas workers are not liable to the registration fee herein
imposed."

0K"

Sec. 8.implementing Rules and Regulations. - The Secretary of Finance,
shall upon the recommendation of the Commissioner of intemal Revenue,
promulgate not later than thirty (30) days upon the effectivity of this Act the
necessary rules and regulations for its proper and effective implementation.

Sec. 9.Repealing Clause. - All laws, Acts, Presidential Decrees,
Executive Orders, issuances, presidential proclamations, rules and regulations or
parts thereof which are contrary to and inconsistent with any provision of this Act are
hereby repealed, amended or modified accordingly.

Sec. 10.Effectivity, - This Act shall take effect fifteen (15) days after its
complete publication either in the Official Gazette, or in at least two (2) newspapers
of general circulation,

Approved,