Lower stock transaction tax takes effect today
Starting July 1, investors will enjoy a reduced stock transaction tax of 0.1 percent as a new law crafted to boost the local capital markets takes effect.
Under Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act (CMEPA) signed in May, the fee paid by a trader when buying a stock on the local bourse will be slashed from 0.6 percent originally.
This means that traders need to pay 0.1 percent of the gross selling price of the shares they wish to buy on the Philippine Stock Exchange (PSE).
For instance, if they want to buy P10,000 worth of stocks, they will have to pay a P10 stock transaction tax versus P60 previously.
In an earlier statement, the PSE said the “much-awaited reform” should help increase trades on the exchange.
Highest friction cost
“It is expected to boost trading activity and liquidity in the stock market and PSE’s competitiveness against other foreign markets,” it noted, adding that the local bourse had one of the highest friction costs in Southeast Asia prior to the passage of CMEPA.
The reduced rate likewise comes at a time when traders are still cautious about geopolitical conflict and the global tariff war.
Still, PSE president Ramon Monzon earlier expressed optimism that the Philippine capital markets would recover.
Compliance
The operator of the local bourse has raised its capital raising target for the year by 42 percent to around P170 billion.
As of May, the PSE found that average daily turnover at the local bourse increased by 6.2 percent to P6.48 billion, entailing more activity at the market.
Apart from the lower stock transaction tax, the law likewise standardized the final withholding tax on interest income at 20 percent.
Before CMEPA was signed into law, final withholding tax rates differed depending on the source of the interest, such as bank savings deposits and time deposits.
The Securities and Exchange Commission pointed out that this provision would help in “simplifying compliance across investment instruments.”
