Investors to benefit from CMEPA passage – PSE

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June 7, 2025 | 12:00am

MANILA, Philippines — The Philippine Stock Exchange Inc. (PSE) has welcomed the passage of the Capital Markets Efficiency Promotions Act (CMEPA), a development it said would benefit stock market investors.

The PSE said the immediate reduction of the stock transaction tax (STT) to 0.1 percent from 0.6 percent is a much-awaited reform that is expected to boost trading activity and liquidity in the stock market.

Further, it is seen enhancing the PSE’s competitiveness against other foreign markets.

Prior to the enactment of CMEPA, the PSE said it had one of the highest friction costs in ASEAN.

“CMEPA also expands the application of STT to other securities listed and traded through a local stock exchange which lends certainty to the tax regime applicable to the secondary transfer through the stock exchange of asset classes other than equities and facilitates the launch of more products in the local stock market,” the stock market operator said.

The PSE said that several key provisions of CMEPA are also expected to support capital market development.

The company said these provisions include broader and clearer definition of securities to simplify the tax treatment of various financial instruments, which can accelerate the development of new products such as derivatives.

It also includes the reduction of documentary stamp tax on the original issuance of shares of stock to 0.75 percent of the par value of such shares of stock from one percent of the par value, which is seen to benefit companies that issue new shares via initial public offering or subsequent equity listings.

The PSE said  the grant of additional 50 percent tax deduction on actual contributions by private employers who contribute an equal or greater amount to their employees’ contributions to Personal Equity and Retirement Account is likewise expected to help spur transactions in the stock market.

Republic Act 12214 or CMEPA is seen as a landmark legislation that lowers the tax rate for several capital market-related transactions to encourage wider investor participation among both local and foreign investors.

The Securities and Exchange Commission (SEC)  said the enactment of CMEPA would lead to a more accessible and efficient capital market.

The commission said the significant tax reforms pave the way for a more dynamic capital market, fostering a robust and investor-friendly financial ecosystem.

According to the SEC, the removal of the documentary stamp tax on mutual funds and unit investment trust funds, along with the tax exemption on income derived from the redemption of such units, will encourage more Filipinos to participate in long-term investment vehicles and deepen the country’s capital markets.

The commission said that harmonizing the capital gains tax to a flat 15 percent on shares of foreign corporations also aligns the Philippine tax regime with global standards and helps attract more foreign investments.