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      Office of the President

      On May 29, 2025, Republic Act (RA) No. 12214 or the Capital Markets Efficiency Promotion Act (CMEPA) rationalizing the tax rates on passive investments was signed into law by President Marcos.

      On the same date, it was announced that President Marcos vetoed the following line items:

      1. Portion of Section 22 of RA 12214 imposing the documentary stamp tax (DST) on lotto and other Philippine Charity Sweepstake Office (PCSO) number games on the bettor;
      2. Section 27(m) of RA 12214, repealing the tax exemption on interest income and DST of PHILGUARANTEE;
      3. Deletion of the tax exemption of non-residents, whether individual or corporate, from transactions with depository banks under the expanded FCDU system.

      Among the key changes in the National Internal Revenue Code of 1997, as amended (Tax Code) are as follows:

      Income Tax

      1. Equity-based compensation forms part of gross income at the time of its exercise.
      2. Gains from the sale, transfer or disposition of bonds excluded from gross income is limited to specific bonds that are issued by the Republic of the Philippines or any of its instrumentalities to finance capital expenditures or programs covered by the Philippine Development Plan or its equivalent and other high-level priority programs of the national government.
      3. Gains realized by the investor upon redemption of shares of stock in a mutual fund company, or units of participation in a mutual fund or unit investment trust fund, are excluded from gross income subject to the condition that prior to redemption, final taxes due on realized gains have been previously withheld at the level of the underlying assets.
      4. An additional deduction of 50% of the employer’s actual contributions made to PERA (under RA No. 9505) shall be granted to private employers that contribute at least equal to the contributions of their employees, subject to the maximum allowable contribution allowed under RA No. 9505, and subject to the condition that the private employer contributes to all its employees’ PERA accounts.
      5. Any interest, yield, or other monetary benefit earned by a citizen, resident alien, non-resident alien engaged in trade or business in the Philippines, domestic corporation, and resident foreign corporation from any currency bank deposit or deposit substitute, trust funds, and other similar arrangements is subject to a uniform rate of 20% FWT.
      6. Royalties earned as passive income is now subject to 20% FWT.  Passive income refers to any income that is earned from sources that do not require a taxpayer’s active pursuit and performance of trade or business and is not subject to VAT.

      Capital Gains Tax

      1. Capital gains derived from the sale, exchange or other disposition of shares of stock in a foreign corporation, except those sold or disposed of through a local or foreign stock exchange, is subject to 15% CGT.

      Stock Transaction Tax

      1. Sale, exchange, or other disposition of shares of stock and other securities listed and traded through a local stock exchange and sale, exchange or other disposition of shares of stock of domestic corporation listed and traded through a foreign stock exchange are subject to a reduced STT rate of 1/10 of 1%.

      Documentary Stamp Tax

      1. Original issuance of shares is subject to a reduced DST rate of 75% of 1%.
      2. Original issuance, redemption, or other disposition of shares in a mutual fund company; and the issuance of a certificate or other evidence of participation in a mutual fund or unit investment trust fund, are exempt from DST.

      Others

      1. Excise tax exemption of pick-ups is removed.
      2. Any person who carries on any business without registering the same in accordance with Section 236 of the Tax Code shall be subject to penalties of fine and imprisonment.

      Any tax exemption and preferential rate on financial instruments issued or transacted prior to July 1, 2025 shall be subject to the prevailing tax rate at the time of its issuance for the remaining maturity of the relevant agreement.

      The law will take effect on July 1, 2025 after publication once on the Official Gazette or in a newspaper of general circulation. The Implementing Rules and Regulations (IRR) will be issued within 60 days from effectivity of the law.

      (RGM&Co. Note: The RA was published in the Official Gazette on 9 June 2025.)

      Here are the links to the full text of the issuance and veto message: Bureau of Internal Revenue, Signed RA 12214 – CMEPA, and Line Veto RA 12214.