Senate Office of the Becretary TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session ) 25 DEC 16 P1:35 SENATE RECEIVED BY: S. No. 1622 Introduced by Senator JV Ejercito AN ACT PROMOTING BUSINESS COMPETITIVENESS BY PROVIDING TEMPORARY TAX RELIEF TO SINGLE PROPRIETORSHIPS, COOPERATIVES, PARTNERSHIPS OR CORPORATIONS CLASSIFIED AS MICRO, SMALL AND MEDIUM ENTERPRISES EXPLANATORY NOTE Micro, small, and medium enterprises (MSMEs) play a significant role in the Philippine economy due to their role in contributing on employment, income, and overall economic development. According to the 2024 Philippine MSME Statistics, out of 1,241,476 registered businesses establishment reported by the Philippine Statistics Authority (PSA), 99.63% or 1,236,908 are MSMEs. 1 Despite their vital role in the Philippines economy, MSMEs face significant challenges that hinder their growth and sustainability, such as limited access to financing, high operational costs, regulatory and compliance burden, lack of business knowledge, competition from large enterprises, and limited market access?, among others. It is crucial to address these obstacles as it enables a more supportive business environment. 1 DTI (2024) Philippine MSME Statistics. https://www.dti.gov.ph/dti-knowledge-hub/dti-statistics 2 SME financing (2024) Understanding the Role and Importance of MSME in the Philippine Economy. https://www.n90.asia/post/role-and-importance-of-msme-in-the-philippine-economy
The government recognizes the critical role of MSMEs in economic development and has introduce various programs and policies to support their growth and sustainability. This bill will further promote, support, and further strengthen the growth and development of MSMEs in all sectors of economy by providing incentives for their continued operation in the country. MSMEs will be granted a three-year exemption from income tax, and will be allowed a twenty-five (25%) additional deduction on the labor expense incurred for each employee hired establishments classified as MSMES. As the Philippines moves toward a more digital and globally connected economy, our MSMEs are set to play an even bigger role in driving growth. This bill will help them continue operating, create more jobs, and expand their businesses steps that will directly boost our nation's economy. In view of the foregoing, the swift passage of this bill is earnestly sought. • • 06= JV EJERCITO
Senate an Office of the Ercretary TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES ) First Regular Session ) DEC 16 P1:35 SENATE RECEIVED BY: S. No. 1622 Introduced by Senator JV Ejercito AN ACT PROMOTING BUSINESS COMPETITIVENESS BY PROVIDING TEMPORARY TAX RELIEF TO SINGLE PROPRIETORSHIPS, COOPERATIVES, PARTNERSHIPS OR CORPORATIONS CLASSIFIED AS MICRO, SMALL AND MEDIUM ENTERPRISES Be it enacted by the Senate and the House of Representatives of the Philippines, in Congress assembled:
Section 1. Grant of Relief from Payment of Income Tax. - Single
proprietorships, cooperatives, partnerships or corporations classified as Micro Enterprises under Republic Act No. 6977, otherwise known as the "Magna Carta for Small Enterprises," as amended, shall be exempt from income tax: Provided, That the exemption from income tax shall be extended to qualified enterprises within the effectivity period as provided under Section 6 of this Act.
Sec. 2. Grant of Authorization to Deduct Labor Expense from Taxable Income.
- In computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B), and (C); and 28(A)(1) of the National Internal Revenue Code of 1997, as amended, there shall be allowed a twenty-five percent (25%) additional deduction on the labor expense incurred for each employee hired by single proprietorships, cooperatives, partnerships or corporations classified as Small and Medium Enterprises under Republic Act No. 6977, otherwise known as the "Magna Carta for Small Enterprises", as amended: Provided, That no deduction in the computation of taxable income shall be extended to taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship: Provided,
1 further, That the additional deduction on the labor expense incurred for each 2 employee shall be extended to qualified enterprises within the effectivity period as 3 provided under Section 6 of this Act.
Sec. 3. Implementing Rules and Regulations. - Within thirty (30) days from the
5 effectivity of this Act, the Department of Finance shall, in coordination with the Bureau of Internal Revenue, promulgate the rules and regulations to effectively implement the provisions of this Act.
SEC. 4. Separability Clause. - If any provision of this Act is declared invalid or
unconstitutional, the provisions not affected thereby shall continue to be in full force and effect.
Sec. 5. Repealing Clause. - All laws, decrees, orders, rules and regulations or
parts thereof which are contrary to or inconsistent with the provisions of this Act are hereby amended, repealed or modified accordingly.
Sec. 6. Effectivity. - This Act shall take effect immediately after fifteen (15)
days from its publication in the Official Gazette or in a newspaper of general 16 circulation. Approved,