Simplified Filing of Returns and Payment of Income Tax

Direr of tu TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session AUG -7 P4:34 SENATE RECEIVED L S. No. 1136 Introduced by Senator JV Ejercito AN ACT PROVIDING FOR SIMPLIFIED REGISTRATION, FILING OF RETURNS AND PAYMENT OF INCOME AND PERCENTAGE TAXES, AND PROVIDING FOR TAX RELIEF FOR MICRO-ENTERPRISES, AMENDING FOR THE PURPOSE SECTIONS 74, 128 AND 236 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED EXPLANATORY NOTE In the Philippine economy, micro, small and medium enterprises (MSMEs) comprise 99.5% of all business establishments, generate 63% of total employment, and contribute about 40% to the Gross Domestic Product (GDP)}. The 2023 List of Establishments (LE) of the Philippine Statistics Authority (PSA) recorded over 1.2 million business enterprises operating in the country, and out of these micro enterprises constitute 90.43% or over 1.2 million of total establishments. That is the reason why micro enterprises can be considered as the Philippines economic backbone, contributing to job creation, poverty reduction, and economic stability. Despite this, many of these enterprises struggles to thrive. The significant challenges include limited access to capital, inadequate business knowledge, navigating government regulations, tax policies, and business permits, limited market reach, and vulnerability to economic disruptions like inflation, natural disasters or pandemics.2 ' MSME Value Chain Rapid Response Survey. https://www.undp.org/philippines/publications/msme-value- chain-rapid-response-survey 2 Advantages and Challenges of Micro Businesses in the Philippines. https://www.n90.asia/post/advantages- and-challenges-of-micro-businesses-in-philippines

Under Republic Act No. 9138 or the Barangay Micro Business Enterprises (BMBE s) Act of 2002, MSMEs enjoy exemption from payment of income tax for income arising from the operation of the enterprise. However, not all micro enterprises are enjoying the benefits under the said Act. With this proposed measure, sole proprietors of micro enterprises employing less than 10 employees shall be exempt from payment of income taxes within the first 3 years of their registration as taxpayers. Further, this bill will also provide a simplified online registration process for such taxpayers. In view of the foregoing, the approval of this bill is earnestly sought. JV EJERCITO

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES ) First Regular Session ) 25 AUG -7 P4:35 SENATE RECEIVED EV S. No. 1136 Introduced by Senator JV Ejercito AN ACT PROVIDING FOR SIMPLIFIED REGISTRATION, FILING OF RETURNS AND PAYMENT OF INCOME AND PERCENTAGE TAXES, AND PROVIDING FOR TAX RELIEF FOR MICRO-ENTERPRISES, AMENDING FOR THE PURPOSE SECTIONS 74, 128 AND 236 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

Section 1. Declaration of Policy. - It is hereby declared the policy of the State to

2 have a national economy that provides for a more equitable distribution of opportunities, income and wealth, a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the 6 underprivileged. Towards these ends, the State shall provide an environment that will 7 enable small businesses to flourish by providing them with accessible, affordable and more efficient government processes to enable them to engage in entrepreneurship and other productive activities.

Sec. 2. Simplified Filing of Returns and Payment of Income Tax. - Section 74(B)

of the National Internal Revenue Code, as amended, is hereby amended to read as follows: "Section 74. Declaration of Income Tax for Individuals. - XXX (B) Return and Payment of Estimated Income Tax by Individuals. - The amount of estimated income as defined in Subsection (C) with respect to which a

declaration is required under Subsection (A) shall be paid in four (4) installments. The first installment shall be paid at the time of declaration and the second and third shall be paid on August 15 and November 15 of the current year, respectively. The fourth Installment shall be paid on or before May 15 of the following calendar year when the final adjusted income tax return is due to be filed; PROVIDED, THAT SELF-EMPLOYED INDIVIDUALS REGISTERED AS SOLE PROPRIETORS OF MICRO ENTERPRISES EMPLOYING LESS THAN TEN (10) EMPLOYEES SHALL ONLY BE REQUIRED TO FILE A FINAL OR ANNUAL INCOME TAX RETURN; PROVIDED FURTHER, THAT SELF-EMPLOYED INDIVIDUALS REGISTERED AS SOLE PROPRIETORS OF MICRO ENTERPRISES EMPLOYING LESS THAN TEN (10) EMPLOYEES SHALL BE EXEMPT FROM PAYMENT OF INCOME TAXES WITHIN THE FIRST THREE YEARS OF THEIR REGISTRATION AS TAXPAYERS; PROVIDED FINALLY, THAT THE EXEMPTION FROM PAYMENT OF INCOME TAXES OF BARANGAY BASED MICRO ENTERPRISES REGISTERED UNDER REPUBLIC ACT NO. 9178, OTHERWISE KNOWN AS THE "BARANGAY MICRO BUSINESS ENTERPRISES (BMBE'S) ACT OF 2002", SHALL BE COVERED BY THE SAID LAW. XXX

Sec. 3. Simplified Filing of Returns and Payment of Percentage Taxes. - Section

128(A)(1) of the National Internal Revenue Code, as amended, is hereby amended to read as follows:

Sec. 128. Returns and Payments of Percentage Taxes. -

(A) Returns of Gross Sales, Receipts or Earnings and Payment of Tax. - (1) Persons Liable to Pay Percentage Taxes. - Every person subject 30 to the percentage taxes imposed under this Title shall file a quarterly return of the amount of his gross sales, receipts or earnings and pay the tax due thereon within twenty-five (25) days after the end of each taxable quarter: Provided, That in the case of a person whose VAT registration is cancelled and who becomes liable

to the tax imposed in Section 116 of this Code, the tax shall accrue from the date of cancellation and shall be paid in accordance with the provisions of this Section; PROVIDED FURTHER, THAT SELF- EMPLOYED INDIVIDUALS REGISTERED AS SOLE PROPRIETORS OF MICRO-ENTERPRISES EMPLOYING LESS THAN TEN (10) EMPLOYEES SHALL ONLY BE REQUIRED TO FILE A FINAL OR ANNUAL PERCENTAGE TAX RETURN. XXX

Sec. 4. Simplified Registration Process. - Section 236(A) of the National Internal

Revenue Code, as amended, is hereby further amended to read as follows:

Sec. 236. Registration Requirements. -

(A) Requirements. - Every person subject to any internal tax shall register once with the appropriate Revenue District Officer: (1) Within ten (10) days from date of employment, or (2) On or before the commencement of business, or (3) Before payment of any tax due, or (4) Upon filing of a return, statement, or declaration as required in 22 this Code The registration shall contain the taxpayer's name, style, place of residence, business and such other information as may be required by the Commissioner in the form prescribed therefor: Provided, That the Commissioner shall simplify the business registration and tax compliance requirements of self-employed Individuals and/or professionals, INCLUDING THE ESTABLISHMENT OF AN ONLINE REGISTRATION, FILING AND PAYMENT SYSTEM. A person maintaining a head office, branch or facility shall register with the Revenue District Officer having jurisdiction over the head office. branch or facility. For purposes of this Section, the term 'facility' include but not be limited to sales outlets, places of production, warehouses and storage places.

Sec. 5. Implementing Rules and Regulations. - Within sixty (60) days from the

implementation of this Act, the Bureau of Internal Revenue, upon consultation with relevant stakeholders, shall issue the implementing rules and regulations to implement the provisions of this Act.

Sec. 6. Separability Clause. - If any part or provision of this Act shall be declared

unconstitutional or invalid, the other provisions hereof which are not affected thereby shall remain in full force and effect.

Sec. 7. Repealing Clause. - All laws, decrees, executive orders, memorandum

orders, memorandum circulars, administrative orders, ordinances or parts thereof which are inconsistent with the provisions of this Act are hereby deemed repealed or modified accordingly.

Sec. 8. Effectivity. - This Act shall take effect fifteen (15) days after its publication

in the Official Gazette or in a newspaper of national circulation. Approved,