MANILA, Philippines — President Ferdinand “Bongbong” Marcos Jr. signed into regulation the Capital Markets Effectivity Promotion Act on Thursday, Might 29, which seeks to simplify taxes and decrease the price of shopping for and promoting shares.
Rep. Joey Salceda (Albay, 2nd District), principal creator of the invoice enacted as Republic Act 12214, described it as a “landmark reform” that can make the capital market extra inclusive and cost-effective.
The regulation amends the Nationwide Inner Income Code to chop the inventory transaction tax from 0.6% to 0.1%.
It additionally removes the documentary stamp tax on mutual funds and Unit Funding Belief Funds (UITFs), successfully making transactions involving these funding merchandise tax-exempt.
Salceda mentioned the adjustments purpose to make pooled funding autos, significantly mutual funds and UITFs, extra enticing to buyers. The regulation additionally removes the tax on the sale or redemption of items or shares in these funds.
Apart from tax exemptions, the brand new financial measure brings two different key adjustments: a flat 20% withholding tax on curiosity revenue, and a 15% tax on income produced from buying and selling shares of international firms.
Because of this one-fifth of what an individual earns from curiosity revenue can be paid to the federal government.
“These reforms decrease prices, simplify compliance, and make it simpler for each Filipino to grow to be an investor,” Salceda mentioned in an announcement on Friday, Might 30.
Vetoed provisions
Whereas Marcos signed the regulation, it didn’t move with out adjustments.
He vetoed three provisions, certainly one of which was the proposed elimination of the tax exemption on revenue earned by nonresidents from International Forex Deposit Models (FCDUs). These are financial institution accounts that deal with deposits and transactions in foreign exchange.
In his veto message, Marcos mentioned the tax exemption ought to be stored to take care of investor confidence and encourage international funds to remain and develop within the nation.
The president additionally rejected the availability that proposed a particular tax on gamers of quantity video games such because the lottery. He mentioned the measure risked being unfair or overly difficult, stressing the necessity to preserve taxation “impartial” for all.
The third provision Marcos vetoed was the proposed repeal of tax breaks for PHILGUARANTEE beneficiaries underneath the Residence Warranty Company Act of 2000.
This includes people who entry inexpensive housing by way of low-cost government-backed loans, which Marcos believes is important.
“These had been prudent vetoes. They don’t have an effect on the core reform. The center of the regulation is unbroken and beating robust,” Salceda mentioned.
Tax breaks for employers
Past tax reforms, the brand new regulation additionally goals to broaden the Private Fairness and Retirement Account (PERA) — a voluntary retirement financial savings program that dietary supplements advantages from state-run social insurance coverage techniques and employer-sponsored plans.
Salceda defined that the regulation permits employers to say a further 50% tax deduction for PERA contributions.
Nevertheless, this profit requires employers to match or exceed the quantity workers contribute. By doing so, employers can decrease their tax legal responsibility whereas encouraging workers to avoid wasting for retirement.
As of December 2024, the comparatively underused retirement financial savings program has simply round 6,000 lively accounts, with PERA property totaling solely P491.4 million, in accordance with the Bangko Sentral ng Pilipinas (BSP).
Salceda defined that this system didn’t work as a result of employers had no incentive to contribute to their workers’ retirement financial savings.
With the brand new regulation, he mentioned extra workers are anticipated to open accounts, serving to them construct adequate financial savings for retirement.
To implement this, the federal government will forgo P6.7 billion in tax income over the following 10 years. Nevertheless, it expects to recuperate round P4.8 billion by way of capital beneficial properties taxes, revenue tax and value-added tax (VAT) sooner or later.
Salceda estimates that PERA property would climb to P140.6 billion with 1.8 million contributors by 2034.