HOUSE OF REPRESENTATIVES /,°
Quezon City, Metro Manila UO OE

Republic of the Philippines Ae’ RESEY
BAN

NINETEENTH CONGRESS
First Regular

House Bill No._ 3165 _

Introduced by HON, JOSEPHINE VERONIQUE “Jaye” R. LACSON - NOEL.
HON. FLORENCIO GABRIEL G. NOEL.

| EXPLANATORY NOTE

It is the policy of the State to stimulate inclusive economic growth by sustaining
equal employment opportunities amongst those who are unemployed or underemployed,
establish a rising income generation and provide for a higher standard of living for every Juan
Dela Cruz, Sadly, this policy has been constantly reminded for by the several government

administrations there are no plan of strategies that has taken place nor implemented
t

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Economic forecasts since 2010 has shown that big investors are bound to invest

huge amount of capital in order to generate jobs and revenues. However, many failed to forewarn
the growing) demands for the micro, small or medium enterprises (MSMEs) in our country.
‘Taking into account its significant potential to relevantly contribute to our annual gross domestic
product, the|Department of Trade and Industry (DTI) made the growth of MSMEs a legislative
priority. As la result, the Philippine MSME sector became a critical driver for the economic

growth of our country.(”

2014 figures of the Philippine Statistics Authority (PSA) would show that there
are 946,988) establishments in our country. Of these, 99.6% or 942,925 establishments are
MSMEs and the remaining 0.4% or 4,063 establishments are large enterprises. Of the total
number of MSMEs, 90.3% or 851,765 establishments are micro enterprises; 9.3% or 87,283
establishments are small enterprises; and 0.4% or 3,886 establishments are medium enterprises,
In that same| year, the MSMEs generated a total of 4,891,836 jobs against the 2,897,421 for the
large enterprises. of these, 30.5% or 2,372,678 jobs were generated by micro enterprises; 25.5%
or 1,986,823 by the small enterprises; and 6.8% or 532,335 by the medium enterprises.

1 Natlonal Feonomte and Development Authorty: (2011). Philippine Development Plan 2011-2016.
2. Department of Trade and Industry. 2014). MSME Statsties,


as a result,

i
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MSMEs dominate the business sector in terms of number of establishments, and
|dubbed as the backbone of the economic development through investment, job

creation, local taxation, productivity enhancement and technological innovation.

| Despite the impressive performance of MSMEs for years, their financial

capability has remained constrained by various factors that prevents them, not just only for

surviving or

this has signi

surface and

and/or local
for medium

businesses ai
not affiliates

organised; 2
their valuabl

growing, but from realising their potentials in a highly competitive environment.

In 2018, the present administration passed into law the Ease of Doing Business Act and
ficantly changed and improved the state of our MSMEs. However, we barely scratched the
fe are still very far to get at par with our neighbouring economies.

This bill seeks to exempt the micro, small or medium enterprises from national
taxes arising from its first five (5) years, for micro or small, and first two (2) years,
enterprise, of its operations provided that these enterprises are newly registered
\d that they do not have any previous or other existing registered businesses and are
, subsidiaries or franchises of any existing company.

| This bill aims: 1. to encourage micro, small or medium enterprise to get
to give these enterprises the proper time to stand on its own; and 3. to recognise

if
e role towards nation-building.
|

IN VIEW OF THE FOREGOING, approval of this bill is earnestly sought.

JOSEPHINE VERONIQUE “Jae R. LACSON - NOEL
Lone District, Malabon City

4 Ge
FLORENCTO GABRIEL G. NOEL
An Waray Party-list

3. MSMED Council. (2011). Micro, Small and Medium Enterprise Developmen Plan 2011-2016.


Introduc

MICRO Al

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

| NINETEENTH CONGRESS
First Regular Session

3165

| House Bill No.

ed by HON. JOSEPHINE VERONIQUE “Jaye” R. LACSON - NOEL
HON. FLORENCIO GABRIEL G. NOEL

AN ACT EXEMPTING
iD SMALL ENTERPRISES FROM NATIONAL AND LOCAL TAXES

ARISING FROM THE FIRST FIVE (5) YEARS OF ITS OPERATIONS; MEDIUM
ENTERPRISES FROM NATIONAL OR LOCAL TAXES ARISING FROM THE FIRST
TWO(2) YEARS OF ITS OPERATIONS.

|

in Congress

Act of 2022.4

State to pron
of the natiot
services, pr
for all.)

equitable dis

goods and

productivity’

|
Be it enacted by the Senate and the House of Representatives of the Philippine

assembled:

| SECTION 1. Short Title. - This act shall be known as the “MSME Tax Exemption

|
SECTION 2. Declaration of State Policy. - \t is hereby declared the policy of the
ote a just and dynamic social order that will ensure the prosperity and independence
and free the people from poverty through policies that provide adequate social
smote full employment, a rising standard of living, and an improved quality of life

|
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| Further, through the goals of the national economy, the state can provide a more
Jribution of opportunities, income, and wealth; a sustained increase in the amount of
fervices produced by the nation for the benefit of the people; and an expanding

as the key to raising the quality of life for all, especially the underprivileged
|
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liom of the Philippines. Avuicte Il. Section 9,


It shall foster the promotion of industrialization and full employment based on

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sound agricultural development and agrarian reform, through industries that make full and

efficient use
foreign mar

of human and natural resources, and which are competitive in both domestic and

ets, However, the State shall protect Filipino enterprises against unfair foreign

competition and trade practices.
|

In the pursuit of these goals, all sectors of the economy and all regions of the

country shall be given optimum opportunity to develop. Private enterprises, including

corporation:
the base of t

economy by
and trade pol

industry, agn

cooperatives, and similar collective organizations, shall be encouraged to broaden

cir ownership.)

These policies are created in order to facilitate the inclusive growth of our
fostering a stable macroeconomic environment and well-balanced fiscal, monetary

jicies. As a result, we can achieve a higher standard of living.
SECTION 3. Definition. - As used in this Act, the following terms shall mean:

“Micro Enterprises” - shall refer to newly registered business engaged in

business and/or services that has (1) an asset the size up to P3,000,000.00; and (2)

an employment size up to 9 employees, whether a single proprietorship, co-operative,

partnership 0)

|
|
i
agribusiness

and (2) an

co-operative}

r corporation.

“Small Enterprise” - shall refer to newly registered business engaged in industry,
and/or services that has: (1) an asset size of P3,000,001.00 up to P15,000,000.00;
employment size from 10 to 99 employees, whether a single proprietorship,

partnership or corporation.

“Medium Enterprise” - shall refer to newly registered business engaged in

industry, agribusiness and/or services that has: (1) an asset size of P15,000,001.00 up to

P 100,000,001

00; and (2) an employment size from 100 to 199 employees, whether a single

proprietorship, co-operative, partnership or corporation.(®

SECTION 4. Exemption from Taxes and Fees. -

a. A micro or small enterprises shall be exempt from all national and local taxes

for the first five (5) years of its operation, provided that:

1. The micro or small enterprise is a newly registered enterprise and not
an affiliate, subsidiary or a franchise of any existing company;

2. In the case of a sole proprietorship, the proprietor of the micro or small
enterprise shall not have any previous or other existing registered

businesses;

5.1987 Consnution ofthe Philippines. Arcle XI. Section 1

66, RA 9501 or the

‘Magna Carta jor Micro, Smail and Medium Enterprises.


3. In the case of a partnership, either of the partners of the micro or small

enterprise shall not have any previous or existing registered business-
es; and

In the case of a corporation, each stockholder of the medium enterprise
shall have at least a five percent (5%) share in stocks and the corpora-
tion shall have no nominal stockholders or stockholders holding the
shares in trust for others. Provided further that, all stockholders of the
micro or small enterprise shall not have held shares of any previous or

existing corporation with at least a five percent (5%) share therein, nor

registered any former or existing sole proprietorship or any partners of
the partnership.

b. A medium enterprise shall be exempt from all national or local taxes, which-

ever is lower, for the first two (2) years of its operation, provided that:

The medium enterprise is a newly registered enterprise and not an af-
filiate, subsidiary or a franchise of any existing company;

In the case of a sole proprietorship or partnership, the proprietor or the
partners of the medium enterprise shall not have any previous or other
existing registered companies, partnerships or businesses, and

In the case of a corporation, each stockholder of the medium enterprise
shall have at least a five percent (5%) share in stocks and the corpora-
tion shall have no nominal stockholders or stockholders holding the
shares in trust for others. Provided further that, all stockholders of the
start-up enterprise shall not have held shares of any previous or exist-
ing corporation with at least a five percent (5%) share therein, nor reg-

istered any former or existing sole proprietorship or partnership.

SECTION 5. Implementing Rules and Regulations. - The Bureau of Internal

Revenue together with the Department of Trade and Industry shall create the necessary IRR

within thirty

(30) days after the effectivity of this act, and thereafter coordinate with Local Gov-

ermment Units the necessary rules and regulations for is effective implementation.

declared inv:
remain in ful

orders, issu
contrary to at

ified accordit

SECTION 6. Separability Clause, - if any provision of this act is subsequently
lid or unconstitutional, other provisions hereof which are not affected thereby, shall

| force and effect.

| SECTION 7. Repealing Clause. - All laws, acts, presidential decrees, executive
ces, presidential proclamations, rules and regulations or parts thereof which are

d inconsistent with any provision of this Act are hereby repealed, amended or mod-


SECTION 8. Effectivity. - This act shall take effect fifteen (15) days after its
complete publication either in the Official Gazette or in at least two (2) newspaper of general cir-

culation.