RR No. 21-2025: Implementing the Amendments Introduced by Republic Act No. 12214, Otherwise Known as the “Capital Markets Efficiency Promotion Act” on Sections 22, 24, 25, 27, 28, 32, 34, 38, 39 and 42 of the National Internal Revenue Code of 1997, as Amended

Summary

RR No. 21-2025 implements the amendments by RA No. 12214 (CMEPA) on Sections 22, 24, 25, 27, 28, 32, 34, 38, 39 and 42 of the Tax Code.

Key points

1. Uniform passive income rates, individuals. Effective July 1, 2025, citizens, resident aliens and non-resident aliens engaged in trade or business pay 20% on bank deposit interest, prizes (except ₱10,000 or less) and other winnings, 10% on cash and property dividends, and 15% on capital gains from shares not traded on an exchange. Capital gains from real property are taxed at 6% on presumed gains, and royalties at 20% (10% on books and literary works and musical compositions). Non-resident aliens not engaged in trade or business pay 25% or the treaty rate on most items.
2. Uniform passive income rates, corporations. Effective July 1, 2025, domestic and resident foreign corporations pay 20% on bank deposit interest and royalties, 15% on capital gains from shares not traded on an exchange, and 6% on gains from land or buildings of domestic corporations. Intercorporate dividends from a domestic corporation are exempt. Non-resident foreign corporations pay 25% or the treaty rate on most items and 15% on dividends under stated conditions.
3. Gross income inclusions. Gross income now includes equity-based compensation such as stock options, taxed at the time of exercise. It also includes gains on the sale, exchange or retirement of bonds and similar instruments, including those with a maturity of more than five (5) years. Exchange-traded ones pay stock transaction tax, and others pay ordinary income tax.
4. New exclusions. Interest income and gains on project-specific government bonds are excluded from gross income. So are gains from redeeming shares or units of a mutual fund or unit investment trust fund, provided final taxes on realized gains were previously withheld at the level of the underlying assets.
5. Deductions and losses. Securities held by dealers and licensed entities are ordinary assets, and worthless ones give ordinary losses. Fifty percent (50%) of an employer’s actual PERA contribution is an additional deduction. Licensed entities can claim wash sale losses, and the capital loss limitation does not apply to dealers and licensed entities selling bonds and similar instruments.
6. Transitional rule. Instruments issued or transacted before July 1, 2025 keep the earlier exemption or rate for their remaining maturity. This needs written or electronic evidence of issuance before that date, a stated maturity beyond July 1, 2025, and no change in maturity, renewal or replacement starting July 1, 2025.

Who is affected

• Individual taxpayers (citizens, resident and non-resident aliens)
• Domestic, resident foreign and non-resident foreign corporations
• Dealers in securities and licensed financial intermediaries
• Employers contributing to PERA

Deadlines and effectivity

• Rates effective July 1, 2025
• Earlier exemptions and rates apply to the remaining maturity of instruments issued before July 1, 2025

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.