CMEPA at a Glance
| Area | Before CMEPA | After CMEPA |
| Stock Transaction Tax (STT) | 0.6% on sale of listed shares | 0.1% flat rate on sale of listed shares |
| Capital Gains Tax | 15% on unlisted domestic shares only; foreign shares taxed up to 35% | 15% flat rate on both unlisted domestic and foreign shares |
| Interest Income | Subject to different rates (e.g. 5% if held for 4 to less than 5 years, 12%for 3 to less than 4 years, or 20% if held for less than 3 years); some exempt | 20% uniform rate on all interest income (with exceptions) |
| Documentary Stamp Tax on Debt Instruments | P1.50 for every P200 or 0.75% on all debt instruments | The same at 75% of 1% or .75% on the issue price |
| Documentary Stamp Tax on Original Issuance Shares of Stock | ₱2.00 for every ₱200 or 1% for original issuance of shares of stock | Reduced to 75% of 1% or 0.75% of the par value |
| PERA Contributions | No added incentive to employers | 50% additional tax deduction for employers matching PERA contributions |
On July 1, 2025, a new law quietly reshaped how investment income is taxed in the Philippines. The Capital Markets Efficiency Promotion Act (CMEPA), or Republic Act No. 12214, amended several provisions of the National Internal Revenue Code and related tax laws to make the Philippine tax system simpler, fairer, more efficient, and regionally competitive.
Among its key features, CMEPA introduces a series of reforms targeting capital gains, interest income, and transaction taxes to create a more consistent and investor-friendly environment.
One such reform is the equalization of capital gains tax on unlisted shares. Previously, capital gains from the sale of unlisted domestic shares were taxed at 15%, while gains from unlisted foreign shares were subject to the progressive income tax rate for individuals and the corporate income tax rate for corporations. CMEPA resolves this inconsistency by imposing a uniform 15% capital gains tax on both domestic and foreign unlisted shares.
Another major reform is the standardization of tax rates on interest income. Previously, the rate depended on the type of investment: Regular bank deposits were taxed at 20%, while long-term deposits of at least five years were tax-exempt. However, if the deposit was withdrawn early, it was taxed at 5% (if held for 4 to less than 5 years), 12% (for 3 to less than 4 years), or 20% (if held for less than 3 years). Interest from foreign currency deposits was taxed at a lower rate of 15%, except for nonresidents. CMEPA now imposes a uniform 20% final withholding tax on all interest income earned by individuals, streamlining compliance. However, non-resident aliens not engaged in trade or business, as well as non-resident foreign corporations, are subject to a 25% rate.
For example, if an individual earned ₱10,000 in interest from a regular time deposit and another ₱10,000 from a 5-year tax-exempt long-term deposit, only the first would have been taxed previously. Under CMEPA, both amounts would now be subject to a flat 20% tax unless exempted by a specific provision or treaty.
As to DST, CMEPA reduced the DST on the original issuance of shares of stock. Prior to CEMPA, the DST for original issuance of shares was taxed at ₱2.00 for every ₱200, or 1% of the par value. Due to CMEPA, the DST for original issuance of shares is taxed at 75% of 1% or 0.75% of the par value. In addition, before CMEPA, debt instruments were subject to a documentary stamp tax (DST) of ₱1.50 for every ₱200, or 0.75% of the issue price prorated if the term is less than one year. Now, the DST on newly issued debt instruments is taxed at 75% of 1% mathematically the same at 0.75% of the issue price prorated if the term is less than one year.
CMEPA also incentivizes retirement savings. Employers who match their employees’ contributions to Personal Equity and Retirement Accounts (PERA) are now entitled to an additional 50% tax deduction, provided such contributions are made uniformly to all employees and within the limits set by Republic Act No. 9505.
While CMEPA introduces broad reforms to streamline and rationalize the tax system, not all proposed provisions were retained in the final law. Certain sections were vetoed by President Marcos Jr., primarily to preserve existing policies deemed vital to national interests and fiscal stability.
Among the vetoed provisions was the proposed taxation of Foreign Currency Deposit Unit (FCDU) transactions. President Marcos Jr. cited the need to maintain the country’s financial openness and competitiveness in attracting foreign capital. As a result, income earned by nonresidents from FCDU transactions remains exempt from income tax.
Another vetoed item involved the proposed amendment to the DST on lotto and other numbers games conducted by the Philippine Charity Sweepstakes Office (PCSO). The provision sought to shift the DST burden from PCSO to the bettors. This was vetoed to protect PCSO’s funds, which are earmarked for public welfare programs.
Additionally, the President vetoed portions of Sections 5 and 19 of Republic Act No. 8763 (the “Home Guaranty Corporation Act of 2000”), particularly those concerning tax exemptions on interest income, documentary stamp tax, and the issuance of bonds. The veto ensures the continued tax-exempt status of PHILGUARANTEE, which is deemed essential to fulfilling its mandate of supporting low-cost and socialized housing.
The changes brought about by CMEPA are a step toward encouraging more Filipinos to save and invest, while also positioning the country as a more attractive destination for both local and foreign capital. These measures together represent a concerted effort to simplify compliance, reduce investor friction, and promote long-term capital formation across various sectors.
To give effect to these reforms, the changes introduced by CMEPA took effect on July 1, following its complete publication in the Official Gazette or in at least one newspaper of general circulation.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Niña Lyka DV Galindez is an Associate at GVES Law.