FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
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Second Regular Session 
SENATE 
S.B.No. 3179 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
A. 
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MAY-7 1'2:24 
The contribution of Micro and Small Enterprises (MSEs) to the country's economic developmen~ 
cannot be overemphasized. Based on the latest figures, MSEs generated a total of 55.9% or 3,180,115 jobs," 
spanning regions and sectors nationwide. Moreover, industries falling under these categories propel 
economic growth by promoting development in the rural areas, thereby dispersing employment 
opportunities, decentralizing economic activities and redistributing wealth throughout the country. 
Skillful, innovative and adaptive as they may be, MSEs find their wheels of growth gradually 
decelerated by the rigorous accounting and reporting requirements prescribed by the National Internal 
Revenue Code (NIRC). Under Section 236 of the NlRC, any person who exceeds or expects to exceed his 
annual gross sales or receipts by One Million Five Hundred Thousand Pesos (PI,SOO,OOO) are mandated to 
register for Value-Added Tax (VAT). At the same time, Section 109 of the same Code provides that 
transactions of goods and services that do not exceed the amount of One Million Five Hundred Thousand 
Pesos (PI,SOO,OOO) are exempted from VAT. Such amount shall be adjusted to its present value using the 
Consumer Price Index (CPI) published by the National Statistics Office (NSO). Entities falling below the 
threshold are mandated instead to pay 3% percentage tax. 
Despite the issuance of Bureau of Internal Revenue (BIR) Revenue Regulations No. 16-2011, which 
adjusts the VAT threshold amount from One Million Five Hundred Thousand Pesos (PI,500,000) to One 
Million Nine Hundred Nineteen Thousand Five Hundred Pesos (PI,919,500), a good number of MSEs still 
find themselves unable to free themselves from the domain of VAT and are without the administrative 
capacity to comply with the rigorous requirements mandated by the NIRC. 
Therefore, it is imperative that the MSEs be given adequate support by reducing the tax impediments 
that hinder them to accelerate economic development. 
This bill aims to protect MSEs by amending sections 109 and 236 of the NIRC, thereby increasing 
the VAT threshold to Five Million Pesos (P5,000,OOO). The increase in the VAT threshold is warranted in 
order to support entrepreneurs, who have proven to be among the significant drivers of the country's 
economic' growth, by freeing them from rigorous tax procedures. MSEs will, in effect, be unburdened from 
the administrative and accounting requirements prescribed by the NIRC to VAT-registered entities, while at 
the same time MSEs will be able to focus on maximizing their resources towards intensitying economic 
activity and creating more jobs. 
Although the proposed measure may result in lower V AT revenues, MSEs will have lower operating 
expenses, which will translate to lower consumer prices. In effect, the end-consumers will ultimately benefit 
from this legislation through increased purchasing power. Likewise, businesses will be able to provide more 
investments in labor and capital resulting to accelerated job generation. 
In view of the foregoing, immediate passage of the bill iSl):'lfflestly sought. 


FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Second Regular Session 
SENATE 
S.B.No. 3179 
) 
) 
) 
Introduced by Senator Ralph G. Recto 
AN ACT 
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MAY -7 P2 :24 
INCREASING THE 
THRESHOLD FOR CERTAIN 
NON-VAT 
TAXPAYERS, 
AMENDING FOR THE PURPOSE SECTIONS 109 AND 236 OF THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED BY REPUBLIC ACT 9337 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
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SECTION. 1. Section 109 of the Nationallntemal Revenue Code of 1997, as amended, 
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is hereby further amended to read as follows: 
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"SEC. 109. Exempt Transactions.-
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"(1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be 
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exempt from the value-added tax: 
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n(A) xxx 
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nCB) xxx 
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n(e) xxx 
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neD) xxx 
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neE) xxx 
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n(F) xxx 
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neG) xxx 
n(R) xxx 
n(l) xxx 
n(J) xxx 
n(K) xxx 
n(L) xxx 
n(M) xxx 
n(N) xxx 
nco) xxx 
n(p) xxx 
n(Q) xxx 
nCR) xxx 
n(s) xxx 
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"(T) xxx 
"(U) xxx 
"(V) Sale or lease of goods or properties or the perfonnance of services other than the 
transactions mentioned in the preceding paragraphs, the gross annual sales andlor receipts do 
not exceed the amount of FIVE MILLION PESOS (P5,000,000) [One milJion five hundred 
thousand pesos (Pl,500,000)]: Provided, That not later than THREE YEARS AFTER THE 
EFFECTIVITY OF THIS ACT [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). 
"(2) xxx" 
SEC. 2. Section 236 paragraph (F) subparagraph (2)(a) and paragraph (G) subparagraph 
(1) of the National Internal Revenue Code of 1997, as amended, are hereby further amended to 
read as follows: 
"SEC. 136. Registration Requirements. -
"(A) xxx 
"(B) xxx 
"(C) xxx 
"(D) xxx 
"(E) xxx 
"(F) Cancellation of Registration. -
"(1) xxx 
"(2) Cancellation of Value-added Tax Registration. - A VAT-registered person 
may cancel his registration for VAT if: 
"(a) He makes written application and can demonstrate to the Commissioner's 
satisfaction that his gross sales or receipts for the following twelve (12) months, other 
than those that are exempt under Section 109 (A) to (U), will not exceed FIVE 
MILLION PESOS (P5,000,000) [One million five hundred thousand pesos 
(Pl,500,000)], or 
"(b) xxx 
"(G) Persons Required to Register for Value-Added Tax.-
"(1) Any person who, in the course of trade or business, sells, barters or 
exchanges goods or properties, or engages in the sale or exchange of services, shall be 
liable to register for value-added tax if: 
"(a) His gross sales or receipts for the past twelve (12) months, other than 
those that are exempt under Section 109 (A) to (U), have exceeded FIVE MILLION 
PESOS (P5,000,000) [One million five hundred thousand pesos (PI,500,000)]; or 
"(b) There are reasonable grounds to believe that his gross sales or receipts for 
the next twelve (12) months, other than those that are exempt under Section 109 (A) 
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to (0), will exceed FIVE MILLION PESOS (P5,000,000) [One million five hundred 
thousand pesos (Pl,500,000)]. 
"(2) xxx 
"(H) xxx 
"(I) xxx 
"Xxx" 
SEC. 3. Implementing Rules and Regulations (IRR). - Within thirty (30) days upon 
approval of this Act, the Secretary of Finance, upon recommendation by the Commissioner of 
Internal Revenue, shaH issue the IRR for the effective implementation of this Act. 
SEC. 4. Separability Clause. - Any portion or provision ofthis Act that may be declared 
unconstitutional or invalid shall not have the effect of nullifying other portions or provisions 
hereof, as long as such remaining portions or provisions can still subsist and be given effect in 
their entirety. 
SEC. 5. Repealing Clause. Alllaws, acts, decrees, executive orders, issuances, and rules 
and regulations or parts thereof which are contrary to and inconsistent with this Act are hereby 
repealed, amended or modified accordingly. 
SEC. 6. Effectivity. - This Act shall take effect fifteen (15) days after its complete 
publication in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved, 
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