New capital markets law to spur investments – Recto

Finance Secretary Ralph G. Recto lauded the enactment of Republic Act No. 12214 or the Capital Markets Efficiency Promotion Act (CMEPA), describing it as a landmark reform that will help bring investment opportunities closer to ordinary Filipinos while bolstering inclusive economic growth.

“This is a game-changing law that makes capital market investments more accessible, affordable, and understandable, especially for small investors,” Recto said on Friday. “It’s a strong step toward financial inclusion and long-term prosperity for our people.”

Signed into law by President Ferdinand R. Marcos Jr., CMEPA forms part of the administration’s broader economic reform agenda. The law seeks to modernize the country’s tax system on passive income and financial instruments, making it more competitive, regionally aligned, and investor-friendly.

Among its key reforms is the standardization of the tax rate on interest income at 20 percent, which aims to level the playing field and eliminate tax arbitrage. It also slashes the Stock Transaction Tax (STT) from 0.6 percent to 0.1 percent and lowers the Documentary Stamp Tax (DST) on the original issue of shares from 1 percent to 0.75 percent.

To encourage wider participation in collective investment schemes, CMEPA exempts the original issuance, redemption, or transfer of mutual fund shares and trust fund units from DST. The law also provides a 50 percent additional tax deduction for private employers who match or exceed employee contributions to Personal Equity and Retirement Accounts (PERA), strengthening retirement savings incentives.

The legislation also introduces a uniform 0.75 percent DST on bonds, debentures, and certificates of indebtedness issued abroad, aligning the tax treatment of similar financial instruments regardless of jurisdiction. It further defines “passive income” and expands the definition of “securities” to ensure consistent taxation across different financial products.

As part of its rationalization measures, CMEPA removes the tax exemption previously enjoyed by government-owned and controlled corporations (GOCCs) on passive income, aligning them with the private sector to broaden the government’s revenue base. The law also repeals the tax exemption on pickup trucks that are not used for livelihood purposes.

However, in line with the Department of Finance’s recommendations, President Marcos exercised his line-item veto powers to preserve investor confidence and uphold fiscal discipline. Among the vetoed provisions were the removal of tax exemptions on nonresident foreign currency deposit earnings and the imposition of DST on Philippine Charity Sweepstakes Office (PCSO) bettors, which the government said could discourage participation in legal charity games. Tax exemptions for the Philippine Guarantee Corporation were also retained to support affordable housing finance.

Recto said the measure is expected to generate over PHP25 billion in revenues between 2025 and 2030, helping reduce the country’s fiscal deficit to 3.8 percent of GDP by 2028.

“This law brings us closer to a broader and deeper financial system where more Filipinos can participate in investment and wealth-building. At the same time, the revenues collected will go directly to infrastructure, health, education, agriculture, and other vital public services,” Recto added.