AN ACT AMENDING SECTIONS 22, 24, 25, 27, 28, 32, 34, 38, 39, 42, 51, 52, 56, 57, 127, 149, 174, 176, 179, 190, 199, AND 259 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSE

[ REPUBLIC ACT NO. 12214, May 29, 2025 ]

AN ACT AMENDING SECTIONS 22, 24, 25, 27, 28, 32, 34, 38, 39, 42, 51, 52, 56, 57, 127, 149, 174, 176, 179, 190, 199, AND 259 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSE

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Capital Markets Efficiency Promotion Act".

Section 2. Declaration of Policy. - The financial sector plays a significant role in the long-term growth of the national economy. A key policy consideration is to allow capital markets to develop as efficiently as possible, with the least intervention. The optimal taxation of capital markets, and the products and transactions that come with them, is an essential element in developing capital markets. Towards this end, the State recognizes the necessity of a simpler, fairer, more efficient, and regionally competitive passive income tax system to encourage savings, as well as develop and deepen capital markets.

In the same vein, the State recognizes tax administration as a driver of economic growth, and the equitable taxation of similar products as an essential aspect of progressive taxation. By making tax compliance easier and more equitable, progressivity is ensured, tax effort is improved, discretion is eliminated, and trust in the taxation system is enhanced. Accordingly, the State adopts the following policies:

Section 3. Section 22 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 22. Definitions. - When used in the his Title:

Section 4. Section 24 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 5. Section 25 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 25. Tax on Nonresident Alien Individual. -

Section 6. Section 27 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 7. Section 28 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 8. Section 32 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 9. Section 34 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 10. Section 38 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 11. Section 39 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 12. Section 42 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 13. Section 51 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 14. Section 52 of the National Internal Revenue Code of 1997, as amended, is hereby amended to read as follows:

Section 15. Section 56 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 16. Section 57 of the National Internal Revenue Code of 1997, as amended, is hereby amended to read as follows:

Section 17. Section 127 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 18. Section 149 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 19. Section 174 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 174. Stamp Tax on Original Issue of Shares of Stock. - On every original issue, whether on organization, reorganization or for any lawful purpose, of shares of stock by any association, company or corporation, there shall be collected a documentary stamp tax of seventy-five percent of one percent (75% 0f 1%) of the par value of such shares of stock: Provided, That in the case of the original issue of shares of stock without par value, the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration for the issuance of such shares of stock: Provided, further, That in the case of stock dividends, on the actual value represented by each share."

Section 20. Section 176 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 176. Stamp Tax on Bonds, Debentures, and Certificates of Stock or Indebtedness Issued in Foreign Countries. - A documentary stamp tax of seventy percent of one percent (75% of 1%) of the value of the transaction shall be collected from the person selling or transferring bonds, debentures, certificates of stock, or certificates of indebtedness issued in any foreign country."

Section 21. Section 179 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 179. Stamp Tax on All Debt Instruments. - On every original issue of debt instruments, there shall be collected a documentary stamp tax of seventy five percent of one percent (75% of 1%) o the issue price of any such debt instrument: Provided, That for such debt instruments with terms of less than one (1) year, the documentary stamp tax to be collected shall be of a proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be imposed on the loan agreement and promissory notes, mortgage, security interest over personal property, and other contracts issued to secure such loan.

For purposes of this section, the term 'debt instrument' shall mean instruments representing borrowing and lending transactions, including but not limited to debentures, certificates of indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the object of contract is located or used in the Philippines, instruments and securities issued by government or any of its instrumentalities, deposit substitutes, debt instruments, certificates or other evidences of deposits that are either drawing interest significantly higher than the regular savings deposit taking into consideration the size of the deposit and the risks involved or drawing interest and having a specific maturity date, promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation."

Section 22. Section 190 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, Lotto or Other Authorized Numbers Games. - On each jai-alai, horse race ticket, lotto, or other authorized number game, there shall be collected a documentary stamp tax of Twenty centavos (P0.20): Provided, That if the cost of the tickets exceeds One peso (P1.00), an additional tax of Twenty centavos on every One peso (P1.00), or fractional part thereof, shall be collected: Provided, further, That the documentary stamp tax on lotto and other number games conducted by the Philippine Charity Sweepstakes Office (PCSO) shall be imposed on the bettor and not on PCSO or any of its funds."

Section 23. Section 199 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 24. Section 258 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 258. Unlawful Pursuit of Business. - Any person who carries on any business without registering the same in accordance with Section 236 shall, upon conviction for each act or omission, be punished by a fine of not less than Five thousand pesos (P5,000) but not more than Twenty thousand pesos (P20,000) and imprisonment of not less than six (6) months but not more than two (2) years: Provided, That in the case of a person engaged in the business of distilling, rectifying, repacking, compounding, or manufacturing any article subject to excise tax, he shall, upon conviction for each act or omission, be punished by a fine of not less than Thirty thousand pesos (P30,000) but not more than Fifty thousand pesos (P50,000) and imprisonment of not less than two (2) years but not more than four (4) years."

Section 25. Implementing Rules and Regulations. - Within sixty (60) calendar days from the effectivity of this Act, the Department of Finance, in consultation with the Securities and Exchange Commission, Bangko Sentral ng Pilipinas, Bureau of Treasury, and Bureau of Internal Revenue, after due consultation with the private sector, shall issue rules and regulations for the effective implementation of this Act.

Section 26. Separability Clause. - If, for any reason, any article or provision of this Act, or any portion hereof, or application of such article, provision, or portion to any person, group, or circumstances is declared invalid or unconstitutional, the remainder of this Act shall not be affected by such decision or declaration.

Section 27. Repealing Clause. - The following laws or provisions of laws are hereby repealed or modified accordingly:

All laws, decrees, executive orders, implementing rules and regulations, issuance, or any part thereof inconsistent with the provisions of this Act are deemed repealed, amended, or modified accordingly.

Section 28. Transitory Provision. - Any tax exemption and preferential rate on financial instruments issued or transacted prior to July 1, 2025 shall be subject to the prevailing tax rate at the time of its issuance for the remaining maturity of the relevant agreement.

Section 29. This Act shall take effect after fifteen (15) days following the completion of its publication in the Official Gazette or in at least one (1) newspaper of general circulation.

Approved,

This Act, which is a consolidation of Senate Bill No. 2865 and House Bill No. 9277, was passed by the Senate of the Philippines and the House of Representatives on February 5, 2025.

Approved: MAY 29 2025

(Sgd.) FERDINAND ROMUALDEZ MARCOS JR.
President of the Philippines

x x x

(L) The term 'shares of stock' shall refer to shares of stock of a corporation, warrants, options as well as units of participation in partnerships (except general professional partnerships), joint stock companies, joint account, joint ventures taxable as corporations, associations, and recreation or amusement clubs (such as golf, polo or similar clubs), and mutual fund certificates.

(M) The term 'shareholder' shall refer to a holder of shares of stock, warrants, options, as well as a holder of a unit of participation, in a partnership (except general professional partnership), joint stock company, joint account, taxable joint venture, and holder of a mutual fund certificate, joint stock company, or insurance company, or member in an association, recreation, or amusement club, such as golf, polo, or similar clubs.

x x x

(T) The term 'securities' shall refer to share, participation, or interest in a corporation, commercial enterprise, or profit-making venture evidenced by a certificate, contract, or instrument, whether written or electronic in character, which shall include:

x x x

(Y) The term 'deposit substitute' shall refer to an alternative form of obtaining funds from the public other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of relending or purchasing of receivables and other obligations: Provided, That the term 'public' shall mean twenty (20) or more individual or corporate lenders at any given time. These instruments may include, but need not be limited to, bankers' acceptances, promissory notes, repurchase agreements, excluding reverse repurchase agreements entered into by and between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent bank, certificates of assignment or participation, and similar instruments with recourse: Provided, however, That debt instruments issued for interbank call loan with maturity of not more than five (5) days to cover deficiency in reserves against deposit liabilities, including those between or among banks and quasi-banks, shall not be considered as deposit substitute debt instruments.

x x x

(MM) The term 'passive income' shall refer to any income that is earned from source that do not require a taxpayer's active pursuit and performance of trade or business and is not subject to value-added tax imposed in this Code."

"Section 24. Income Tax Rates. -

x x x

(B) Rates of Tax on Certain Passive Income. -

x x x

(5) Royalties. - A final tax at the rate of twenty percent (20%) is hereby imposed on royalties earned as passive income: Provided, That royalties on books, as well as other literary works and musical compositions, shall be subject to a final tax of ten percent (10%)."

"Section 27. Rates of Income Tax on Domestic Corporations. -

x x x

(D) Rates of Tax on Certain Passive Income. -

(1) Interests. - A final tax of twenty percent (20%) is hereby imposed upon the the amount of interest, yield, or other monetary benefit earned or received from any currency bank deposit, deposit substitute, trust fund, or other similar arrangements.

(2) Tax on Income Derived under the Expanded Foreign Currency Deposit System. - Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, offshore banking units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Bangko Sentral of the Philippines (BSP) to transact business with foreign currency deposit system units and other depository banks under the expanded foreign currency deposit system shall be exempt from all taxes, except net income from such transactions as may be specified by the Secretary of Finance, upon the recommendation by the Monetary Board to be subject to the regular income tax payable by banks: Provided, however, That interest income from foreign currency loans granted by such depository banks under said expanded system to residents other than offshore banking units in the Philippines or other depository banks under the expanded system shall be subject to a final tax at the rate of ten percent (10%).

(3) Intercorporate Dividends. - x x x

(4) Capital Gains from the Sale, Exchange, or Disposition of Shares of Stock Not Traded in a Local or Foreign Stock Exchange. - A final tax at the rate of fifteen percent (15%) is hereby imposed upon the net capital gains realized during the taxable year from the sale, exchange, or other modes of disposition of shares of stock of a domestic or foreign corporation, except shares sold or disposed of through a local or foreign stock exchange subject to stock transaction tax under Section 127(A) and (B) of this Code.

(5) Capital Gains Realized from the Sale, Exchange, or Disposition of Lands and/or Buildings. -

(6) Royalties. - A final tax of twenty percent (20%) is hereby imposed on royalties earned as passive income.

x x x."

"Section 28. Rates of Income Tax on Foreign Corporations. -

(A) Tax on Resident Foreign Corporations. -

(B) Tax on Nonresident Foreign Corporations. -

x x x

(c) Capital Gains from Sale of Shares of Stock not Traded in a Local or Foreign Stock Exchange. - A final tax at the rate of fifteen percent (15%) is hereby imposed upon the net capital gains realized during the taxable year from the sale, exchange, or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through a local or foreign stock exchange."

"Section 32. Gross Income. -

(A) General Definition. - Except when otherwise provided in this Title, gross income means all income derived from whatever source, including (but not limited to) the following items:

(B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall be exempt from taxation under this Title:

"Section 34. Deductions from Gross Income. -

x x x

(E) Bad Debts. -

(M) An additional deduction of fifty percent (50%) of the employer's actual contributions made to personal equity and retirement accounts under Republic Act No. 9505, otherwise known as "personal Equity and Retirement Account (PERA) Act of 2008,' shall be granted to private employers that contribute at least equal to the contributions of their employees, subject to the maximum allowable contribution under Republic Act No. 9505: Provided, That only private employers that contribute to all of their employee' PERA accounts shall be eligible for the additional allowable deduction."

"Section 38. Losses from Wash Sales of Stock or Securities. -

(A) In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities, where it appears that within a period of beginning thirty (30) days before the date of such sale or disposition and ending thirty (30) days after such date, the taxpayer has acquired (by purchase or by exchange upon which the entire purchase or by exchange upon which the entire amount of gain or loss was recognized by law), or has entered into a contract or option to acquire substantially identical stock or securities, then no deduction for the loss shall be allowed under Section 34, unless the claim is made by a dealer in stock or securities or by an entity or financial intermediary duly licensed by the appropriate govenrment regulatory agencies to buy and sell securities either for the entity's own account or for the account of others and with respect to a transaction made in the ordinary course of the business of such dealer, entity, or financial intermediary.

x x x."

"Section 39. Capital Gains and Losses. -

x x x

(C) Limitation on Capital Losses. - Losses from sales or exchange of capital assets shall be allowed only to the extent of the gains from such sales or exchanges. If a dealer in securities, or other entity or financial intermediary duly licensed by the appropriate government regulatory agencies to trade in securities, sells any bond, debenture, note, or certificate or other evidence of indebtedness issued by any corporation (including one issued by a government or political subdivision thereof), with interest coupons or in registered form, any loss resulting from such sale shall not be subject to the foregoing limitation and shall not be included in determining the applicability of such limitation to other losses.

x x x."

"Section 42. Income from Sources Within the Philippines. -

(A) Gross Income from Sources Within the Philippines. - x x x

x x x."

"Section 51. Individual Return. -

x x x

(C) When to File. -

x x x."

"Section 52. Corporation Returns. -

x x x

(D) Return on Capital Gains Realized from Sale of Shares of Stock not Traded in the Local or Foreign Stock Exchange. - Every corporation deriving capital gains from the sale or exchange of shares of stock, not traded through a local or foreign stock exchange as prescribed under Sections 27(D)(4), 28(A)(1), and 28(B)(5)(c), shall file a return within thirty (30) days after each transaction and a final consolidated return of all transactions during the taxable year on or before the fifteenth (15th) day of the fourth (4th) month following the close of the taxable year."

"Section 56. Payment and Assessment of Income Tax for Individuals and Corporations. -

(A) Payment of Tax. -

x x x

(3) Payment of Capital Gains Tax. - The total amount of tax imposed and prescribed under Sections 24(B)(3), 24(B)(4), 25(A)(1), 27(D)(4), 27(D)(5), 28(A)(1) and 28(B)(5)(c) shall be paid on the date the return prescribed therefor is filed by the person liable thereto: Provided, That if the seller submits proof of the intention to avail of the benefit of exemption of capital gains under existing special laws or tax treaties, no such payments shall be required: Provided, further, That in case of failure to qualify for exemption under such special laws, tax treaties, and implementing rules and regulations, the tax due on the gains realized from the original transaction shall immediately become due and payable, subject to the penalties prescribed under applicable provisions of this Code: Provided, finally, That if the seller, having paid the tax, submits such proof of intent within six (6) months from the registration of the document transferring the real property, the seller shall be entitled to a refund of such tax upon verification of compliance with the requirements for such exemption.

x x x."

"Section 57. Withholding of Tax at Source. -

(A) Withholding of Final Tax on Certain Incomes. - Subject to rules and regulations the Secretary of Finance may promulgate, upon the recommendation of the Commissioner, requiring the filing of income tax return by certain income payees, the tax imposed or prescribed under Section 24(B), 25(A), 25(B), 27(D), 28(A)(1), 28(A)(4), 28(A)(6), 28(B), 33 , and 282 of this Code on specified items of income, subject to final tax, shall be withheld by payor-corporation and/or person and paid in the same manner and subject to the same conditions as provided in Section 58 of this Code.

x x x."

"Section 127. Tax on Sale or Exchange of Shares of Stock Listed and Traded through a Local or Foreign Stock Exchange. -

(D) Common Provisions. - x x x."

"Section 149. Automobiles. - There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer's or importer's selling price, net of excise and value-added tax, in accordance with the following schedule:

x x x

Provided, That hybrid vehicles shall be subject to fifty percent (50%) of the applicable excise tax rates on automobiles under this section: Provided, further, That purely electric vehicles shall be exempt from excise tax on automobiles.

x x x."

"Section 199. Documents and Papers Not Subject to Stamp Tax. - The provisions of Section173 to the contrary notwithstanding, the following instruments, documents, and papers shall be exempt from the documentary stamp tax:

x x x