The Securities and Exchange Commission (SEC) announced that a new law is expected to generate greater savings for investors and enhance liquidity in the capital market. The Capital Markets Efficiency Promotion Act (CMEPA), or Republic Act No. 12214, took effect on July 1.
The CMEPA’s most significant reform is the reduction of the stock transaction tax from 0.6% to 0.1%. Previously the highest in the ASEAN region, this tax reduction is designed to make the Philippine stock market more attractive to investors.
“The reduced stock transaction tax is one of the most important reforms under the CMEPA, as it brings our rate on par with our ASEAN peers,” said SEC Chairperson Francis Lim. “The old rate discouraged the public, especially those who wanted to engage in bulk transactions. With the lower tax, the savings can be reinvested back into the capital market.”
The CMEPA also includes several other key provisions aimed at modernizing the market and attracting more investment:
- Tax Harmonization: The law standardizes the 20% tax on interest income across all investment instruments, eliminating the previous bias against short-term deposits.
- Alignment with Global Standards: The new law sets a flat 15% capital gains tax on shares of foreign corporations, aligning the Philippines with global standards and making the country a more attractive destination for foreign investment.
- Boost for Retirement Savings: The CMEPA encourages employers to contribute more to their employees’ Personal Equity and Retirement Account (PERA). Companies can now claim an additional 50% tax deduction for PERA contributions that match or exceed the employee’s contribution.
- Reduced Costs for Companies: The law also lowers the documentary stamp tax on the original issuance of shares of stock from 1% to 0.75% of the par value, incentivizing companies to raise capital through initial public offerings (IPOs) and follow-on equity listings.
According to Lim, these changes are part of a broader effort to create a more efficient, competitive, and inclusive capital market in the Philippines.
