Tax Alert No. 25 Revenue Regulations (RR) No. 21-2025
26 Aug 2025
Implementing the Amendments Introduced by Republic Act (RA) 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
Please be informed that Revenue Regulations (“RR”) No. 21-2025 has been issued to implement the amendments to Sections 22, 24, 25, 27, 28, 32, 34, 38, 39, and 42 of the National Internal Revenue Code of 1997 (“Tax Code”), as amended. We provide below the salient points:
- Passive income is limited to those income not actively earned through business or trade.
- Effective July 1, 2025, Uniform Tax Rates on Passive Income Standardized tax rates for interest, dividends, royalties, and capital gains across individuals and corporations are as follows:
Individuals
|
Tax Rate |
|
Passive Income |
Citizen, Resident Alien, and NRA-ETB* |
Non-Resident Alien Not Engaged in Trade or Business |
Interests from any currency bank deposit or deposit substitute, trust funds and other similar arrangements, regardless of their nature or tenure |
20% |
25% (or the tax treaty rate) |
Any income of non-residents from transactions with depositary banks under the expanded system |
Exempt |
Exempt |
Prizes (except prizes amounting to P10,000 or less) |
20% |
25% |
Prizes amounting to P10,000 or less |
Subject to graduated tax rates under Section 24[A] of the Tax Code |
25% |
Other Winnings (except winnings amounting to P10,000 or less from Philippine Charity Sweepstakes and Lotto) |
20% |
25% |
Other winnings amounting to P10,000 or less from Philippine Charity Sweepstakes and Lotto |
Exempt |
25% |
Cash and/or Property Dividends |
10% - except for NRA-ETB which is subject to income taх rate of 20% |
25% (or the tax treaty rate) |
Capital Gains Sale, exchange or other disposition of shares of stock in a domestic or foreign corporation not traded in a local or foreign stock exchange
(Note: Shares of a domestic corporation sold or disposed of through a local or foreign stock exchange are subject to stock transaction tax, in lieu of capital gains tax, under Section 127 (A) and (B) of the Таx Code) |
15% |
15% (or the tax treaty rate)
|
Capital Gains from Sale of Real Property |
6% on presumed gain |
6% on presumed gain |
Royalties earned as Passive Income |
20% |
25% (or the tax treaty rate) |
Royalties on books, as well as other literary works and musical compositions |
10% |
25% (or the tax treaty rate) |
Cinematographic films and similar works by a Non-Resident Cinematographic Film Owner, Lessor or Distributor |
25% |
25% (or the tax treaty rate) |
Rents, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains, profits, and income |
Subject to graduated tax rates under Section 24[A] of the Tax Code |
25% (or the tax treaty rate) |
*Non-Resident Alien Engaged in Trade or Business (“NRA-ETB”)
Corporations
|
Tax Rate |
|
Passive Income |
Domestic and Resident Foreign Corporation |
Non-Resident Foreign Corporation |
Interest, yield, or any other monetary benefit earned from any currency bank deposit or deposit substitute, trust funds and other similar arrangements, regardless of their nature or tenure |
20% |
25% (or the tax treaty rate) |
Income derived by a depositary 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 ng Pilipinas (BSP) to transact business with foreign currency deposit system units and other depositary banks under the expanded foreign currency deposit system |
Exempt from all taxes |
Exempt |
Interest income from foreign currency loans granted by such depositary banks under said expanded systems to residents other than offshore banking units in the Philippines or other depositary banks under the expanded system |
10% |
Exempt |
Intercorporate dividends received from a domestic corporation |
Exempt |
15% subject to the condition that the country of residence of the corporate shareholder allows a credit of 10% tax deemed to have been paid in the Philippines or that the country of residence of the corporate shareholder does not impose any tax on the dividends (or the tax treaty rate) |
Capital Gains - Sale, exchange or other dispositions of shares of stock of a domestic or foreign corporation not traded in a local or foreign stock exchange (Note: shares sold or disposed of through a local or foreign stock exchange are subject to stock transaction tax, in lieu of capital gains tax, under Section 127 (A) and (B) of the Tax Code) |
15% |
15% (or the tax treaty rate) |
Capital Gains Realized from the Sale, Exchange, or Disposition of Land and/or Buildings (for Domestic Corporations) |
6% on the Gain presumed to have been realized on the sale, exchange or disposition of lands and/or Buildings (capital assets) |
Not applicable |
Royalties earned as Passive Income |
20% |
25% (or the tax treaty rate on royalties) |
Rents, royalties, salaries, premiums (except reinsurance premiums) annuities, compensation, emoluments, or other fixed or determinable annual, periodic or casual gains, profits, and income, and capital gains, except capital gains subject to tax under Sec 28 (A)(1) |
Subject to Regular Corporate Income Tax under Sec 27 (A) and Sec 28 (A) of the Tax Code |
25% (or the tax treaty rate) |
- Digital services and services rendered by non-residents in the Philippines are considered as being rendered in the course of trade or business in the Philippines and thus, subject to VAT.
- Equity-based compensation (e.g., stock options, RSUs, SARs) is included as part or gross income and taxable upon exercise. Gains from sale or exchange or retirement of long-term debt instruments are now included as part of gross income and taxable unless traded on an exchange.
- Interest income and gains from project-specific government bonds are tax-exempt. Gains from redemption of mutual fund and UITF shares are exempt if taxes were withheld at the asset level.
- Worthless securities held by licensed dealers are deductible as ordinary losses. 50% of employer contributions to PERA accounts are deductible from gross income.
- Licensed entities, aside from dealer in stock or securities, can deduct losses from wash sales of securities if done in the ordinary course of business of such licensed entity.
- Limitation on capital losses does not apply to licensed dealers or financial intermediaries trading in securities.
- Interest income from Philippine-issued instruments is considered Philippine-sourced, regardless of the place of execution.
- Instruments issued before July 1, 2025 retain their original tax treatment if: (1) Issued before the effective date; (2) Have a maturity beyond July 1, 2025; and (3) No renewal or change in terms post-July 1, 2025.
You may access the full version of the RR through the BIR website.
For any inquiry or request for assistance, please feel free to contact anyone from our Tax Services group. You may also reach us through this link
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