Business Formalization, Integration and Transition Act of 2025

TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES First Regular Session JUL 29 P2:10 SENATE RECEP S. No. _ Introduced by Senator Bam Aquino AN ACT ESTABLISHING A PROGRAM TO FORMALIZE MICRO AND SMALL ENTERPRISES THROUGH SIMPLIFIED REGISTRATION, TRANSITIONAL SUPPORT, AND ACCESS TO GOVERNMENT ASSISTANCE EXPLANATORY NOTE A large portion of the Philippine economy continues to operate in the informal sector. Many enterprises are unregistered, unregulated, and often excluded from the full benefits of government support and protection. These informal businesses, while vibrant and entrepreneurial, face barriers to growth and resilience due to their lack of legal recognition, limited access to finance, and vulnerability to economic shocks. The proposed measure aims to make formalization an attractive, accessible, and beneficial pathway for our country's micro and small enterprises. By streamlining registration through a Simplified and Unified Registration System, reducing upfront costs, and offering a package of transitional support, the bill encourages informal businesses to take the leap into the formal economy. Under this proposed measure, businesses that register under the Micro and Small Enterprise Formalization Program will benefit from: • A one-time tax amnesty and a presumptive tax rate of one percent on gross sales for five years; • Subsidized contributions to social protection programs like SSS, PhilHealth, and Pag-IBIG; • A limited exemption from the minimum wage law to ease early employment costs. In turn, formalization will be required for access to government services, ensuring that public support goes to businesses that are part of the formal economy and committed to long-term growth and compliance. This bill builds on the principle that economic inclusion must be matched by ease of doing business and a supportive policy environment. It also advances the goals

of poverty reduction, job creation, and resilient enterprise development, all while strengthening the tax base and expanding the reach of government safety nets. When we make it easier and more worthwhile for informal businesses to formalize, we create a win-win scenario: for entrepreneurs, for workers, and for our country's economy as a whole. In view of the foregoing, the passage of this bill is earnestly sought. Bam aquint

TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES First Regular Session JUL 29 P2:10 SENATE RECE: 206 S. No. _ Introduced by Senator Bam Aquino AN ACT ESTABLISHING A PROGRAM TO FORMALIZE MICRO AND SMALL ENTERPRISES THROUGH SIMPLIFIED REGISTRATION, TRANSITIONAL SUPPORT, AND ACCESS TO GOVERNMENT ASSISTANCE Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Business Formalization,

2 Integration and Transition Act of 2025."

Sec. 2. Declaration of Policy. - It is the declared policy of the State to foster a

4 vibrant and inclusive economy by encouraging the integration of informal enterprises 5 into the formal sector. The State shall simplify registration processes, reduce the costs 6 of formalization, and provide a package of transitional support to make formalization 7 an attractive and beneficial pathway for micro and small enterprises.

Sec. 3. The Micro and Small Enterprise Formalization Program. - There is

hereby established a Micro and Small Enterprise Formalization Program, hereinafter referred to as the "Program," to be led by the Department of Trade and Industry (DTT). The Program shall be open to all existing unregistered micro and small enterprises.

Sec. 4. Simplified and Unified Registration. - The DTI, in coordination with the

14 Anti-Red Tape Authority (ARTA), shall establish a Simplified and Unified Registration 15 System for enterprises applying under the Program. This system shall:

(a) Be accessible online through the Philippine Business Hub and physically 2 through all Negosyo Centers nationwide. (b) Utilize a single, simplified application form that simultaneously registers the 4 enterprise with the DT or Securities and Exchange Commission (SEC), the Bureau of 5 Internal Revenue (BIR), the concerned Local Government Unit (LGU) for the business 6 permit, the Social Security System (SSS), the Philippine Health Insurance Corporation 7 (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG Fund). (c) Impose a single, consolidated registration fee not to exceed One Thousand 9 Pesos (PhP 1,000.00).

Sec. 5. Transitional Support Regime. - An enterprise that formalizes under this

Program shall be entitled to the following benefits for a period of five (5) years from its date of registration: (a) Tax Amnesty and Presumptive Taxation, - The enterprise shall be granted a one-time amnesty from all tax liabilities for prior periods of informal operation. For the three-year transitional period, it shall be subject to a simplified and presumptive tax rate of one percent (1%) of its gross annual sales in lieu of all other national and local taxes. (b) Subsidized Social Security Contributions. - The National Government shall subsidize fifty percent (50%) of the employer's share of the contributions to SSS, 20 PhilHealth, and Pag-IBIG Fund for the owner and up to five (5) employees. (c) Exemption from Minimum Wage Law. - Enterprises registered under this Program shall be exempt from the coverage of the minimum wage law, provided that this exemption shall only apply to the first five (5) employees hired.

Sec. 6. Linking Formality to Government Support. - Upon the effectivity of this

Act, formal registration shall be a mandatory requirement for any MSME to access any form of government assistance, including but not limited to:

(a) Financing programs from the Small Business Corporation and other 2 Government Financial Institutions. (b) Participation in government-sponsored trade fairs, marketing events, and 4 training programs. (c) Eligibility to participate in government procurement under Republic Act No. 9184 and its amendments.

Sec. 7. Appropriations. - The amount necessary to implement the provisions of

8 this Act shall be charged against the current year's appropriations of the Department 9 of Trade and Industry (DTT). Thereafter, such amounts as may be necessary for the 10 continued implementation of this Act shall be included in the annual General 11 Appropriations Act (GAA).

Sec. 8. Implementing Rules and Regulations. - Within ninety (90) days from

the effectivity of this Act, the Department of Trade and Industry (DTI), in coordination with the Anti-Red Tape Authority (ARTA), Bureau of Internal Revenue (BIR), Department of the Interior and Local Government (DILG), Securities and Exchange Commission (SEC), Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), Home Development Mutual Fund (Pag-IBIG Fund), Department of Labor and Employment (DOLE), and other concerned agencies, shall promulgate the necessary rules and regulations for the effective implementation of 20 this Act.

Sec. 9. Separability Clause. - If any provision of this Act is declared

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

Sec. 10. Repealing Clause. - All laws, decrees, executive orders, rules and

25 regulations, and other issuances inconsistent with this Act are hereby repealed or modified accordingly.

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Sec. 11. Effectivity. - This Act shall take effect fifteen (15) days after its

2 publication in the Official Gazette or in a newspaper of general circulation. Approved,