PHILIPPINES Trends and Developments Contributed by: Francis L. Fragante, Jennifer Marie G. Castro and Carriz Andrea F. Nana, Cruz Marcelo & Tenefrancia
Tax Reforms To attract more foreign investment, the Philippine gov - ernment has rolled out tax reforms that aim to make doing business and investing in the country more accessible, equitable and cost-efficient. Capital Market Efficiency Promotion Act On 29 May 2025, the Philippine government enacted Republic Act No 12214, otherwise known as the Capi - tal Market Efficiency Promotion Act (CMEPA), intro - ducing comprehensive amendments to the National Internal Revenue Code of 1997. CMEPA aims to enhance the efficiency, simplicity and competitiveness of the Philippine capital markets through targeted tax reforms. The law is rooted in the principle that strong capital markets are critical to economic growth. Accordingly, CMEPA advances several core policy objectives: • simplifying the tax system to ease compliance; • promoting equitable taxation of passive income to eliminate arbitrage opportunities; • enhancing the Philippines’ regional competitive - ness; • encouraging investment through favourable treat - ment of equity and debt transactions; and • supporting corporate entities in capital formation through the capital markets. CMEPA clarifies definitions relevant to capital mar - ket transactions, such as “shares of stock”, “secu - rities” and “passive income”, to ensure consistency in tax administration. One of the law’s most signifi - cant changes is the standardisation of tax on interest income and royalties. Where different tax rates once applied, interest income from Philippine bank depos - its, trust funds, and similar financial instruments is now subject to a flat 20% final withholding tax. The law also equalises how investment earnings are taxed: dividends now carry a 10% final tax, while profits made from selling shares that are not publicly traded are taxed at 15%, whether the corporation involved is domestic or foreign. This removes past inconsistencies in tax treatment and reinforces fairer conditions for both domestic and foreign investors.
To encourage more market activity and reduce the cost of investing, the stock transaction tax on the sale or exchange of listed domestic shares has been sig - nificantly reduced from 0.6% to 0.1% of the gross selling price. This lower rate now applies not only to local stock exchange transactions but also to those conducted through foreign stock exchanges, boosting regional competitiveness and investor appeal. Further, CMEPA lowers the documentary stamp tax (DST) on original issuances of shares of stock and debt instruments from 1% to 0.75%, including bonds, debentures and similar instruments issued both locally and internationally. To further remove common tax hurdles, several transactions are now exempt from DST, including: • the sale, exchange or redemption of listed shares on local or foreign stock exchanges; • original issuances and redemptions of shares in mutual fund companies; and • the issuance of certificates or other evidence of participation in mutual funds or unit investment trust funds. CMEPA marks a landmark tax reform in the Philippines, reducing investment and trading costs, strengthening investor protections and encouraging wider participa - tion in the capital markets. CREATE MORE Act Republic Act No 12066, known as the CREATE MORE Act, was passed to further enhance the Philippines’ investment climate by making the tax incentive sys - tem more competitive, predictable and investor- friendly while maintaining safeguards for government revenues. The law responds to concerns from inves - tors about the complexity and rigidity of the existing tax regulations, aiming to improve policy stability and business confidence. The CREATE MORE Act enables business enter - prises (RBEs) which are registered with Investment Promotion Agencies to access longer and more flex - ible incentive periods, especially those engaged in high-value, strategic or export-oriented activities. This change helps investors achieve long-term plan -
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