Senate OKs bill lowering tax on stock transactions

The Senate on Monday approved on final reading a bill that seeks to cut the tax on stock transactions to 0.1% from 0.6%, aiming to encourage more Filipinos to invest in the stock market.

Twenty-one senators unanimously voted in favor of Senate Bill No. 2865, or the Capital Markets Efficiency Promotion Act, which aims to make the country’s capital market more competitive with its regional peers.

A final tax rate of 10% will be imposed on cash and property dividends received from a local corporation, joint stock company, mutual fund, or on the share of an individual in the net income of the entity.

The House of Representatives passed a counterpart bill in March, which also seeks to lower the tax on dividends for non-resident investors to 10% from the current 25%.

These measures will be reconciled in a bicameral conference committee before President Ferdinand R. Marcos, Jr. signs the final version into law.

A tax rate of 15% will be set on net capital gains during a taxable year on shares of stock in domestic and foreign corporations, except shares sold.

There will also be a final tax rate of 20% on royalties earned as passive income, while royalties on books, literary works, and musical compositions will be subject to a 10% tax.

Based on a forecast by the Philippine Stock Exchange, the lowered 0.1% stock transaction tax would boost stock trading to P4.9 trillion by 2029.

“It lowers friction costs and puts us within a comparable range with the ASEAN (Association of Southeast Asian Nations) region. Definitely a crucial measure,” Benedicta Du-Baladad, founding partner and chief executive officer of tax, commercial, and corporate services firm Du-Baladad Associates, said in a Viber message.

The bill also imposes a final tax of 20% on interest or monetary benefits earned from any currency bank deposit, trust fund, or similar arrangement.

Capital gains from the sale, exchange, barter, or disposition of shares of stock not traded on the Philippine Stock Exchange will be subject to a 15% tax on net capital gains during a taxable year, based on a copy of the bill.

Resident foreign corporations and their regional operating headquarters will have to pay a minimum corporate income tax of 10% on their taxable income.

“Our proposed measure seeks to promote efficiency in the capital markets and reduce the barriers that have long made investing seem out of reach for the everyday Filipino,” Senator Sherwin T. Gatchalian, the bill’s sponsor, told the Senate floor after the approval.

“With the passage of this measure, we are taking a significant step toward revitalizing our capital markets, ensuring they serve not just a privileged few, but every Filipino aspiring for professional growth and security.” — John Victor D. Ordoñez