CMEPA: Capital markets reimagined

TOP OF MIND

- Jemica E. Magbanua

Republic Act 12214, known as the Capital Markets Efficiency Promotion Act (CMEPA), represents a significant legislative advancement aimed at bolstering the capital markets within the Philippines. It was signed into law by President Marcos on May 29, 2025, and took effect on July 1, 2025.

The Act underscores the importance of an optimal taxation system for capital markets, which is essential for the sustained growth of the national economy. It strives to establish a simpler, fairer, and more competitive passive income tax system to promote trust and voluntary compliance within the taxation framework.

The Act introduces changes to tax rates on various forms of passive income, specifically interest, dividends, and royalties. Dividends are now taxed at a uniform final rate of 10 percent, offering a more streamlined approach to dividend taxation. Interest and royalties are subject to a final tax rate of 20 percent, except for royalties related to books, other literary works and musical compositions, which remain at a final rate of 10 percent. Interest income from foreign currency deposits is also now taxed at an increased final tax rate of 20 percent, up from the previous tax rate of 15 percent. The updated tax rules apply to citizens, resident aliens, nonresident aliens engaged in trade or business in the Philippines, domestic corporations and resident foreign corporations.