CMEPA Law (RA 12214)
Updated June 13, 2026
Definition
Republic Act No. 12214, the Capital Markets Efficiency Promotion Act (CMEPA), was approved on May 29, 2025 and took effect on July 1, 2025. It amended the Tax Code's rules on passive income, documentary stamp tax and the stock transaction tax, setting a single 20% final tax on deposit interest in any currency and cutting the stock transaction tax to 0.1%.
CMEPA changed how investment income and capital market transactions are taxed from July 1, 2025. Interest on bank deposits, deposit substitutes, trust funds and similar arrangements earned by citizens, resident aliens and nonresident aliens engaged in business is now subject to a 20% final tax regardless of currency or tenure. That ended the 15% rate on foreign currency deposit (FCDU) interest of residents and the exemption for long-term deposits of five years or more. Instruments issued or transacted before July 1, 2025 keep their old treatment for the rest of their term, as long as the maturity is unchanged and they are not renewed or replaced. On transactions, CMEPA cut the stock transaction tax on listed shares from 0.6% to 0.1% of the gross selling price, set documentary stamp tax (DST) on the original issue of shares at 0.75% of par value (down from 1%), restated DST on debt instruments as 0.75% of the issue price, and exempted sales of listed shares from DST. Cash and property dividends paid to resident individuals stay at 10% final tax. CMEPA did not change estate tax, donor's tax, penalties or VAT.
Why it matters
CMEPA changes the after-tax return on savings and investments. Depositors pay the same 20% final tax on peso and foreign currency deposits, and new long-term deposits no longer escape tax. Stock investors pay a lower stock transaction tax on every sale of listed shares, and companies raising capital pay less DST on new shares. Knowing which rule applies, and whether an older instrument is grandfathered, avoids surprises on bank statements and broker confirmations.
How it works
CMEPA works by amending sections of the Tax Code. Banks and other payors withhold the 20% final tax on interest at source, so depositors do not report that interest on their income tax returns. Brokers collect the 0.1% stock transaction tax on each sale of listed shares through the exchange. Issuers pay the DST on original issues of shares and debt instruments. The BIR implemented the law through RR 19-2025 (DST), RR 20-2025 (stock transaction tax) and RR 21-2025 (passive income), all effective with the law on July 1, 2025.
Examples
Example
Long-term deposit opened after July 1, 2025 Maria opens a ₱500,000 five-year peso time deposit in August 2025 that earns ₱30,000 of interest a year. Before CMEPA a five-year deposit was exempt. Under CMEPA the bank withholds the 20% final tax, or ₱6,000 a year, and Maria receives ₱24,000.
Example
Cash dividends to a resident individual Juan owns 1,000 shares of a domestic corporation and receives ₱15 per share in cash dividends, or ₱15,000. The corporation withholds the 10% final tax of ₱1,500. CMEPA did not change this rate for resident individuals.
Example
Original issue of shares XYZ Corporation issues new shares with a total par value of ₱100,000,000. DST on the original issue is 0.75% under CMEPA, or ₱750,000, compared with ₱1,000,000 at the previous 1% rate, a saving of ₱250,000.
Example
Sale of listed shares An investor sells listed shares through the Philippine Stock Exchange for a gross selling price of ₱1,000,000. The stock transaction tax is 0.1%, or ₱1,000, compared with ₱6,000 at the previous 0.6% rate.
Example
Foreign currency deposit of a resident Lisa, a resident citizen, opens a US dollar FCDU deposit after June 30, 2025 that earns interest equal to ₱15,000. The bank withholds the 20% final tax, or ₱3,000. Under the old 15% rate the tax would have been ₱2,250.
Common misconceptions
- Myth: CMEPA lowered every investment tax
- Fact: It lowered the stock transaction tax and DST on new shares, but it raised the tax on residents' FCDU interest from 15% to 20% and removed the exemption for new long-term deposits.
- Myth: CMEPA changed estate tax, donor's tax and penalties
- Fact: It did not. Estate and donor's tax remain at 6% under the TRAIN amendments, and surcharges and interest are unchanged.
- Myth: My existing five-year deposit is now taxed at 20%
- Fact: Deposits placed before July 1, 2025 keep their exemption until maturity, as long as the maturity is unchanged and the deposit is not renewed or replaced.
Questions people ask
What is CMEPA Law or RA 12214?
CMEPA is Republic Act 12214, the Capital Markets Efficiency Promotion Act. It was approved on May 29, 2025 and took effect on July 1, 2025. It amended the Tax Code's rules on interest and other passive income, documentary stamp tax and the stock transaction tax.
How does CMEPA affect my investment taxes?
From July 1, 2025, interest on bank deposits, deposit substitutes and trust funds is taxed at a 20% final rate whatever the currency or term, the stock transaction tax on listed shares is 0.1% instead of 0.6%, and dividends from domestic corporations stay at 10% for resident individuals.
Who benefits from CMEPA Law incentives?
Depositors and investors, stock market traders, companies that issue shares or debt instruments, and employers that grant stock options or contribute to employees' PERA accounts are all affected by different CMEPA provisions.
Does the 20% rate apply to all deposits?
For citizens, resident aliens and nonresident aliens engaged in business, yes: interest on bank deposits, deposit substitutes, trust funds and similar arrangements is taxed at 20% final regardless of currency or tenure. FCDU income of nonresidents stays exempt, and instruments placed before July 1, 2025 keep their old treatment until maturity if not renewed or replaced.
Do I need to do anything to apply CMEPA rates?
No. The 20% final tax on interest is withheld by the bank, the stock transaction tax is collected by the broker, and DST is paid by the issuer. Interest already subjected to final tax is not reported again on your income tax return.
What changed compared with the old rates?
FCDU interest of residents went from 15% to 20%; long-term deposits lost their exemption; the stock transaction tax went from 0.6% to 0.1%; and DST on original issues of shares went from 1% to 0.75%. The 10% final tax on dividends to resident individuals did not change.
When did CMEPA Law take effect?
CMEPA (RA 12214) was approved on May 29, 2025 and took effect on July 1, 2025. The BIR issued RR 19-2025, RR 20-2025 and RR 21-2025 to implement its DST, stock transaction tax and passive income provisions.
How does CMEPA treat nonresident aliens?
A nonresident alien not engaged in trade or business in the Philippines pays a 25% final tax on gross Philippine-source income. Nonresidents' FCDU income remains exempt.
Did CMEPA change the tax on dividends?
No. Cash and property dividends from domestic corporations remain subject to a 10% final tax for citizens and resident aliens, and 20% for nonresident aliens engaged in trade or business.
What documentation do I need for CMEPA benefits?
Keep your bank's certificate of final tax withheld (BIR Form 2306), broker trade confirmations showing the stock transaction tax, and records showing when older deposits were placed if you rely on the grandfathering rule.
Next steps
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Each citation links directly to the issuing authority’s document.
- LawPhil Project (Arellano Law Foundation). “RA 12214 (CMEPA): full enacted text; capital markets / passive-income reforms (2025).” lawphil.net. Republic Act No. 12214, Capital Markets Efficiency Promotion Act. Accessed .