CMEPA cuts investment taxes, boosts Filipino market access – DOF

The Department of Finance said the newly enacted Capital Markets Efficiency Promotion Act (CMEPA) lowers transaction costs and improves accessibility to investment opportunities for ordinary Filipinos.

CMEPA, signed into law earlier this year, reduces the stock transaction tax (STT) on the sale or exchange of shares from 0.6% to 0.1%—a move the DOF says makes the Philippine market more competitive regionally.

“There is no truth that CMEPA discourages people from saving and investing,” Finance Secretary Ralph G. Recto said. “CMEPA is not just a revenue bill, but an act to boost our capital markets and allow for greater participation, especially among ordinary Filipinos.”

Recto emphasized that investing is no longer just for the wealthy.

“Investing is now not just for the rich, but is for every Filipino who dreams of financial security and a better future, who can now achieve that by diversifying their savings and investments,” he said.

Prior to CMEPA, the Philippines had the highest STT in the ASEAN region, discouraging local investors from participating actively in the stock market.

According to the Bangko Sentral ng Pilipinas 2021 Financial Inclusion Survey, only 8 million out of 77 million Filipino adults—just over 10%—own any form of investment product.

“The other benefit that people are not really highlighting is on the equity side––sales tax has been reduced from 60 basis points to just 10 basis points,” said Sun Life Investment Management President Mike Enriquez.

Lower STTs are expected to enhance net returns for small investors by reducing the deductions from share sales and boosting market liquidity through higher trading activity.

CMEPA also reduced the documentary stamp tax (DST) on the original issuance of shares from 1% to 0.75%, cutting the cost of capital for companies and opening new participation avenues for investors.

Notably, DST is now fully exempt for investments in mutual funds and Unit Investment Trust Funds (UITFs), which are commonly used by young professionals and the middle class to build diversified portfolios.

“These pooled investment schemes allow a single investor to put money into a broader range of asset types and share risks and benefits with other participants,” the DOF said in a statement.

RCBC Chief Economist Mike Ricafort said the measure strengthens financial literacy and personal savings.

“Bottomline is to encourage people to save more, to invest more, to build their retirement funds, build their wealth funds, financial literacy, make their money work better for them,” Ricafort said.

CMEPA also harmonizes the final withholding tax (FWT) on interest income to a flat rate of 20%, regardless of the term of the financial instrument.

Legal expert Atty. Benedicta Du-Baladad of Du-Baladad and Associates noted this removes preferential treatment that previously benefited larger or longer-term depositors.

“That was what is good in what CMEPA did,” she said. “The tax-induced distortion in making investment decisions has been removed.”

In a further revenue-generating move, the law removes tax exemptions on passive income earned by Government-Owned and Controlled Corporations (GOCCs), increasing public funding potential.

CMEPA forms part of the administration’s broader push for financial inclusion and capital market deepening by removing structural barriers that have historically discouraged retail participation.

The DOF continues to encourage public investment in savings programs like Pag-IBIG MP2 and Retail Treasury Bonds, as part of a multi-pronged approach to economic empowerment.