New law aims to boost Filipino participation in capital markets

Finance Secretary Ralph Recto hailed the signing of Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act (CMEPA), as a milestone in expanding investment access for ordinary Filipinos and fostering inclusive economic growth.

“This is a landmark reform that brings capital market investments closer to the Filipino people,” Recto said Friday. “By making investment channels clearer, more affordable, and more accessible—especially for small investors—we open the door to greater financial inclusion.”

CMEPA, aligned with President Ferdinand R. Marcos Jr.’s agenda for long-term economic development, seeks to modernize the tax framework for passive income and financial instruments to make the Philippines more competitive in the region.

Key provisions of the law include:

• Standardizing the tax on interest income at 20%

• Reducing the Stock Transaction Tax from 0.6% to 0.1%

• Lowering the Documentary Stamp Tax (DST) on original issuance of shares from 1% to 0.75%

• Exempting DST on mutual fund-related transactions

To ensure fairness, the law also imposes a uniform 0.75% DST on foreign-issued financial instruments and removes certain outdated exemptions, such as those previously granted to government-owned and controlled corporations (GOCCs) and pick-up trucks not used for livelihood.

CMEPA also expands definitions of “passive income” and “securities” to standardize tax treatment across financial products. It further incentivizes retirement savings by granting an additional 50% tax deduction to private employers who match or exceed their employees’ contributions to Personal Equity and Retirement Accounts (PERA).

While most provisions were retained, President Marcos issued line-item vetoes on specific sections to maintain policy consistency. Exemptions for nonresident income from Foreign Currency Deposit Units and PCSO bettors were preserved to uphold investor confidence and support public welfare funding.

The law is projected to generate over PHP25 billion in revenue between 2025 and 2030, helping reduce the country’s fiscal deficit to 3.8% of GDP by 2028.

“This is a major victory,” Recto said. “A broader and deeper financial system will not only unlock investment opportunities for all but also fund critical services in infrastructure, health, education, and agriculture.”