The Philippine stock market is poised for a significant boom, with transactions expected to increase by seven times once the Capital Market Efficiency Promotion Act (CMEPA) is signed into law, according to Frederick Go, Special Assistant to the President for Investment and Economic Affairs Secretary.
At the InvestPH 2025 investor conference, Go said the law’s key provision—the reduction of capital gains tax from 0.6 percent to a mere 0.1 percent—will drive this surge in activity. “Imagine that it brings down the friction cost from 0.6 percent to 0.1 percent. The premise of reducing the tax is that the volume will go up,” Go explained, highlighting the expected positive effect on liquidity in the market.
Go further said the biggest challenge facing the Philippine capital markets today is liquidity, and he believes that reducing friction tax is one of the most effective measures the government can take. “We need to boost liquidity in the market, and reducing the friction cost is the best way forward,” he said, urging all stakeholders in the capital markets to rally behind the bill.
The CMEPA, designed to streamline and simplify taxation on passive income, brings several other key provisions aimed at making the Philippine financial landscape more attractive to investors. Once signed into law, the bill will standardize the final withholding tax on passive income at 20 percent. Additionally, it will lower the documentary stamp tax (DST) on the original issuance of shares to 0.0075 percent, down from the current 0.01 percent.
Other provisions of the law will include income tax exemptions for gains from the redemption of unit investment trust funds (UITFs) and mutual funds, as well as the removal of the DST on the issuance, redemption, or disposition of shares in mutual funds.
The proposed changes are expected to not only invigorate local stock market activity but also enhance the Philippines’ attractiveness as an investment destination. As policymakers and stakeholders await the signing of the CMEPA, all eyes are on how these reforms will reshape the future of the nation’s capital markets.
