Market law spurs investor growth

Greater investor participation and stronger long-term investing are expected to follow the signing of the newly enacted Capital Markets Efficiency Promotion Act (CMEPA), which reduces taxes on key financial transactions and introduces reforms designed to strengthen the country’s financial ecosystem.

Securities and Exchange Commission (SEC) Chairperson and CEO Emilio B. Aquino said on Tuesday that the law, ratified on 29 May, aims to deepen the Philippine capital market while attracting both local and foreign investors.

“We welcome the enactment of the CMEPA, a key piece of legislation that strengthens our ability as a regulator to create an environment that not only increases capital market accessibility to more Filipinos but also builds trust and confidence in long-term investing,” Aquino said.

“Together, these significant tax reforms pave the way for a more dynamic capital market that will foster a robust and investor-friendly financial ecosystem,” he added.

Key provisions under the CMEPA include the reduction of the stock transaction tax to 0.1 percent from 0.6 percent and the lowering of the documentary stamp tax (DST) on the original issue of shares to 0.75 percent from 1 percent. These changes are expected to improve market liquidity and encourage wider participation.

The law also removes the DST on mutual funds and unit investment trust funds (UITFs) and exempts income from the redemption of such units from tax — measures seen to promote long-term investment among Filipinos.

Further, the final withholding tax on interest income is standardized at 20 percent, streamlining compliance across investment instruments. 

The capital gains tax on shares of foreign corporations is also harmonized to a flat 15 percent, aligning the Philippine tax system with global standards to help attract more foreign capital.

To encourage retirement savings, CMEPA amends Republic Act No. 9505, or the Personal Equity and Retirement Account (PERA), by allowing employers to claim an additional 50 percent tax deduction for contributions that match or exceed those of their employees.

With the passage of CMEPA, Aquino said he expects more individuals will recognize the benefits of investing in PERA to achieve financial independence in retirement.