New law seen boosting savings, encouraging more Filipinos to invest in capital markets
Manila: The Philippine government has slashed taxes on stock transactions under a new law introduced recently, in a major reform to stimulate capital market growth and promote savings by ordinary Filipinos.
Republic Act No. 12214 (also known as the Capital Markets Efficiency Promotion Act, or CMEPA, signed on May 30, 2025), cuts the Stock Transaction Tax (STT) from 0.6% to 0.1%.
It also reduces the Documentary Stamp Tax (DST) on the original issuance of shares from 1% to 0.75%.
The move is significant step toward making the stock market more accessible and attractive — especially to ordinary and first-time investors.
The stock transaction tax cut could give more impetus for overseas Filipino workers (OFWs) and ordinary savers at home to park their savings in the local sharesmarket and cash in on the economy's long-term growth.
OFWs remitted $38.34 billion to loved ones in 2024, according to Bangko Sentral ng Pilipinas data.
The Philippines' business process outsourcing (BPO) industry, which employs 1.57 million people, earned another $38.7 billion for the Asian country.
Most of these earnings go into consumption.
For example, in 2024, 95.2% of OFW remittances received by Filipino households were spent on food and other household needs, one survey shows.
The tax cut could incentivise savings and investing.
In practical terms, the stock transaction tax is applied to every sale of shares listed on the Philippine Stock Exchange (PSE).
Before the new law (0.6%):
₱100,000 sale = ₱600 tax
₱1,000,000 sale = ₱6,000 tax
After the new law (0.1%):
₱100,000 sale = ₱100 tax
₱1,000,000 sale = ₱1,000 tax
That’s a ₱500–₱5,000 saving per transaction — money that stays in the investor’s pocket or gets reinvested.
While the new law significantly lowers taxes on stock transactions, CMEPA also exempts the issuance, redemption, or transfer of mutual fund shares and investment trust funds from DST, a move aimed at lowering transaction costs and encouraging market participation.
“This is a landmark reform that brings capital market investments closer to the Filipino people,” said Finance Secretary Ralph Recto, adding that the law will make investment “more affordable and accessible, especially for small investors.”
Key features of CMEPA:
Standardises tax on interest income at 20% to prevent tax arbitrage.
Imposes a uniform 0.75% DST on financial instruments (e.g., bonds, debentures) issued abroad, ensuring tax neutrality.
Defines and clarifies terms such as “passive income” and “securities” to promote consistency in tax treatment.
Grants additional 50% tax deductions to employers contributing equal or more to employee Personal Equity and Retirement Accounts (PERA).
Repeals tax exemptions for pick-up trucks not used for livelihood and removes passive income tax exemptions for government-owned and controlled corporations (GOCCs), making the playing field even and further broadening the tax base.
To maintain fiscal discipline, President Marcos Jr. exercised "line-item veto powers", excluding certain provisions:
Retained the tax exemption for nonresident income from Foreign Currency Deposit Units to preserve investor confidence.
Excluded DST on Philippine Charity Sweepstakes Office bettors to avoid discouraging legal gaming.
Preserved tax exemptions for the Philippine Guarantee Corporation to sustain affordable housing finance.
Economic agenda
The law aligns with President Marcos Jr.’s long-term economic agenda and is projected to generate over ₱25 billion in revenue from 2025 to 2030.
Recto emphasised that this revenue will help lower the fiscal deficit to 3.8% of GDP by 2028 and finance key public services.
“This is a major victory for the country, as inclusive access to investment opportunities and a broader, deeper financial system are vital pillars of long-term, inclusive growth,” Recto was quoted as saying by the Philippine News Agency.
Aside from this, the tax collected will be used to fund our priority projects in infrastructure, health, education, agriculture, and other public services.”
Under the new law, the tax exemption for nonresident income from Foreign Currency Deposit Units (FCDUs) was retained — meaning it was not removed or changed.
This decision aims to preserve investor confidence and maintain the country’s attractiveness to foreign capital.
Foreign currency deposit units (FCDUs) are specialised bank accounts in the Philippines that allow individuals and institutions to deposit or invest in foreign currencies (e.g., US dollars) instead of Philippine pesos.
Nonresidents are defined as foreign investors or overseas individuals/entities who are not based in the Philippines but may place their money in local banks through FCDUs.
What is the tax exemption about: Normally, income from bank deposits (like interest) is taxed. But for nonresidents using FCDUs, their interest income is exempt from Philippine taxes. This tax-free status encourages them to keep their money in the country.
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