THE Capital Market Efficiency Promotion Act has officially been enacted as Republic Act No. 12214 following President Ferdinand Marcos Jr.’s signature on May 29, 2025, House Ways and Means Chair Rep. Joey Sarte Salceda confirmed today.
“This is a landmark reform. Republic Act No. 12214 will help build a deeper, more inclusive, and more affordable capital market system in the Philippines. But more than anything else, this law helps secure the future of Filipino workers,” Salceda said.
The law introduces long-overdue structural reforms in financial taxation, including lower transaction taxes, harmonized capital gains and interest tax rules, and better treatment for investment products like mutual funds, unit investment trust funds, and retirement accounts.
The Most Transformative Provision: Expanded PERA for Worker Retirement
A key highlight of the new law is the expansion of the Personal Equity and Retirement Account or PERA, a long-underutilized retirement savings tool. Under RA 12214, employers can now claim an additional 50 percent tax deduction for PERA contributions, provided they match or exceed the employee’s contribution.
Salceda pushed for the provision during the bicam.
“This is about dignity in aging. We want every Filipino to retire with something of their own. This reform makes that possible,” Salceda said.
Despite being created in 2008, PERA has fewer than 6,000 active accounts as of end-2024. According to data from the Bangko Sentral ng Pilipinas, total PERA assets amount to only ₱491.4 million. Salceda said this is an extremely small base for a retirement system, representing a tiny fraction of household financial assets. “This reform changes that. This is my gift to this generation of workers and professionals who will now have bigger corporate pensions than our generation or any generation before. They will retire better.”
Salceda emphasized that the effects of the expanded PERA on retirement security will be felt most profoundly a generation from now, as today’s workers benefit from compounded savings and institutional support. “But the economy as a whole, especially our financial markets, will begin feeling the impact much sooner. It increases capital formation, long-term saving, and investment depth almost immediately.”
The expanded PERA under RA 12214 will cost about ₱6.7 billion in forgone taxes over 10 years but is projected to recover at least ₱4.8 billion through capital gains taxes, income and VAT from finance jobs and businesses, and reduced future social pension costs.
By 2034, PERA assets could reach ₱140.6 billion with around 1.48 million contributors. This will provide long-term capital to domestic markets and significantly improve retirement security at a minimal net fiscal cost.
Salceda also authored the law increasing the social pension for indigent senior citizens and has led the charge for expanding coverage and institutional support for the elderly. “PERA is the complement to that work. Public pensions protect the poorest seniors. But private savings through PERA will allow workers to age with dignity and financial independence. One protects from poverty. The other enables comfort and choice.”
Key Reforms Under RA 12214
Among the most significant features of the law are:
• Reduction of the Stock Transaction Tax from 0.6 percent to 0.1 percent
• Removal of Documentary Stamp Tax on mutual funds and Unit Investment Trust Funds
• Tax exemption of income from redemption of mutual fund and UITF units
• Standardization of final withholding tax on interest income at 20 percent
• Harmonization of capital gains tax to a flat 15 percent on shares of foreign corporations
“These reforms lower costs, simplify compliance, and make it easier for every Filipino to become an investor,” Salceda said.
Presidential Line-Item Vetoes: Three Provisions Removed
In his transmittal message, President Marcos commended Congress for the long-overdue measure but vetoed three specific provisions:
1. Removal of the tax exemption on nonresident income from Foreign Currency Deposit Units
– Vetoed to preserve investor confidence and currency inflows
2. Express imposition of Documentary Stamp Tax on bettors in number games such as PCSO lotteries
– Vetoed to protect the neutrality of the tax as an indirect levy
3. Repeal of tax exemptions for PHILGUARANTEE under the Home Guaranty Corporation Act of 2000
– Vetoed to sustain support for low-cost housing finance
“These were prudent vetoes. They do not affect the core reform. The heart of the law is intact and beating strong,” Salceda said.
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