Manila: Foreign investments in the Philippines' financial markets are seen to remain robust following the signing into law of Republic Act (RA) 12214 or the Capital Market Efficiency Promotion Act (CMEPA) last May 29. Among others, RA 12214 reduces stock transaction tax from 0.6 percent to 0.1 percent, and the documentary stamp tax (DST) on the original issue of shares of stock from 1 percent to 0.75 percent. It also imposes a uniform 0.75 percent DST on bonds, debentures, and certificates of stock or indebtedness issued in foreign countries, regardless of jurisdiction, and exempts from DST the original issuance, redemption, or transfer of mutual fund shares, as well as certificates or proof of participation in mutual funds or investment trust funds.
According to Philippines News Agency, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a reply to an e-mail, said the law is a 'good signal in prioritizing and legislating important reform measures in the country to create a more conducive environment for foreign investors (after the CREATE MORE Law)', referring to the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy.
He said the law, which authorities project to generate more than PHP25 billion in revenues from this year until 2030, would 'help attract more large foreign and local investors with lower stock transactions tax/costs, vis-a-vis other ASEAN/Asian stock markets, as part of making our markets more cost competitive for transactions.'
He explained that the '0.5 percentage point tax savings, at the very least on stock market transactions, also as part of the efforts to increase trading volumes and liquidity in the local stock market and (to) make the stock market trading environment more conducive for large global fund managers looking for better returns around the world.'
'Thus, the 0.5 percentage point tax savings, combined with 0.25 savings on new issuances would be an outright 0.75 de facto gains on funds invested,' he said.
'More importantly, the CMEPA Law would help structurally attract more large scale foreign fund managers and better compete with other ASEAN/Asian markets in terms of reduced transaction costs/taxes, assuming all other factors are the same," he added.
Bangko Sentral ng Pilipinas-registered foreign investments in 2024 reached USD17.93 billion, up by 39.2 percent against the nearly USD12.89 billion in 2023, mostly from the UK, Singapore, US, Luxembourg, and Hong Kong. BSP data showed that the bulk of these investments were placed in peso-denominated government securities (GS) at almost 54.2 percent followed by those placed in shares listed with the Philippine Stock Exchange (PSE), 45.8 percent; and other investments, less than 1 percent.
