REVENUE REGULATIONS (RR) NO. 021-2025
These Regulations are hereby promulgated to implement the amendments introduced by the CMEPA to Sections 22. 24, 25, 27, 28, 32, 34, 38, 39, and 42 of the Tax Code.
CERTAIN PASSIVE INCOME.
INDIVIDUAL
(Effective July 1, 2025)
A. Citizen, Resident Alien, and Non- Resident Alien Engaged in Trade or Business
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Sections 24(B)(1) and 25(A)(1), in relation to the last paragraph of Section 27(D)(2) | 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, except income of non-residents, whether individuals or corporations, from transactions with depositary banks under the expanded system which shall be exempt from income tax | 20% |
| Sections 24(B)(1) and 25(A)(1) | Prizes (except prizes amounting to P10,000 or less which shall be subject to graduated tax rates under Section 24[A] of the Tax Code) | 20% |
| Sections 24(B)(1) and 25(A)(1) | Other Winnings (except winnings amounting to P10,000 or less from Philippine Charity Sweepstakes and Lotto which shall be exempt) | 20% |
| Sections 24(B)(2) and 25(A)(2) | Cash and/or Property Dividends | General Rule: 10% Exception: Non-Resident Alien Engaged in Trade or Business which is subject to income taх rate of 20% |
| Sections 24(B)(3) and 25(A)(1) | 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 | 15% |
| Sections of the Tax Code | Particulars | Income Таx Rate |
| transaction tax, in lieu of capital gains tax, under Section 127 (A) and (B) of the Таx Code) | ||
| Sections 24(B)(4) and 25(A)(1) | Capital Gains from Sale of Real Property | 6% on gains presumed to have been realized from the sale, exchange, or other disposition of real property (capital assets) |
| Sections 24(B)(5) and 25(A)(1) | Royalties earned as Passive Income | 20% |
| Sections 24(B)(5) and 25(A)(1) | Royalties on books, as well as other literary works and musical compositions | 10% |
| Section 25(A)(3), in relation to Section 28 | Cinematographic films and similar works by a Non-Resident Cinematographic Film Owner, Lessor or Distributor | 25% |
| Section 27(D)(2) | Any income of non-residents from transactions with depositary banks under the expanded system | Exempt |
B. Non-Resident Alien Not Engaged in Trade or Business
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Section 25(B), in relation to Section 27(D)(2) | 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, except income from transactions with depositary banks under the expanded system which shall be exempt from income tax | 25% (or the tax treaty rate) |
| Section 25(B) | Cash and/or Property Dividends | 25% (or the taх treaty rate) |
| Section 25(B) | Rents, royalties, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains, profits, and income. | Treaty rate 25% (or the tax treaty rate on royalties) |
| Section 25(B), in relation to Section 24(B)(3) | Capital Gains – Sale, exchange or other disposition of shares of stock-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% (or the tax treaty rate) |
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Section 25(B), in relation to Section 24(B)(4) | Sale of real property | 6% on gains presumed to have been realized from the sale, exchange, or other disposition of real property (capital assets) |
| Section 27(D)(2) | Any income of non-residents from transactions with depositary banks under the expanded system | Exempt |
CORPORATION
(Effective July 1, 2025)
- Domestic and Resident Foreign Corporation
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Sections 27(D)(1) and 28(A)(1) | 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% |
| Sections 27(D)(2) and 28(A)(6) | 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, except net income from such transactions as may specified by the Secretary of Finance, upon recommendation by the Monetary Board to be subject to the regular income tax payable by banks | Exempt from all taxes |
| Sections 27(D)(2) and 28(A)(6) | Interest income from foreign currency loans granted by such depositary banks under said expanded systems to residents other than shore banking units in the Philippines or other depositary banks under the expand system | 10% |
| Sections 27(D)(3) and 28(A)(1) | Intercorporate dividends received from a domestic corporation | Exempt |
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Section 27(D)(4) | 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% |
| Section 27 (D)(5) | 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 |
| Sections 27(D)(6) and 28(A)(1) | Royalties earned as Passive Income | 20% |
B. Non-Resident Foreign Corporation
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Section 28(B)(1), in relation to Section 28(A)(6) | 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, except income from transactions with depositary banks under the expanded system which shall be exempt from income tax | 25% (or the tax treaty rate) |
| Section 28(B)(5)(b) | Cash and/or Property Dividends received from a domestic corporation | 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) |
| Sections of the Tax Code | Particulars | Income Таx Rate |
| Section 28(B)(1) | 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) | 25% (or the tax treaty rate on royalties |
| Section 28(B)(5)(c) | Capital Gains – Sale, exchange or other dispositions of shares of stock of a domestic 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% (or the tax treaty rate) |
| Section 28(A)(6)(b) | Any income of non-resident corporations from transactions with depositary banks under the expanded system | Exempt |
If the income is generated in the active pursuit and performance of the corporation’s primary purposes, the same is not passive income. For VAT purposes, in the course of trade or business includes transactions incidental thereto. Also, the rule of regularity to the contrary notwithstanding, the following shall be considered as being rendered in the course of trade or business in the Philippines and, thus, subject to VAT:
- Services rendered in the Philippines by non-resident foreign persons; and
- Digital services delivered by non-resident digital service providers consumed in the Philippines.
INCLUSION IN THE GROSS INCСОМЕ
- Equity-based compensation (e.g., stock options, RSUs, SARs) is included in gross income upon exercise.
- Gains from sale or retirement of bonds/debentures (incl. over 5 years maturity) are subject to STT if traded on an exchange; otherwise, taxed as ordinary income or corporate income.
EXCLUSION FROM GROSS INCOME. –
- Interest Income and Gains from the Sale, Transfer, or Disposition of Project-Specific Bonds. – Specific bonds that are issued by the Republic of the Philippines or any of its instrumentalities to finance capital expenditures or programs covered by the Philippine Development Plan or its equivalent and other high-level priority programs of the national government, as determined by the Secretary of Finance.
- Gains from Redemption of Shares or Units of Participation in Mutual Fund and Unit Investment Trust Fund. – Gains realized by the investor upon redemption of shares of stock in a mutual fund company as defined in Section 22 (BB) of the Tax Code, or units of participation in a Mutual Fund or Unit Investment Trust Fund: Provided, that prior to such redemption, final taxes due on realized gains have been previously withheld at the level of the underlying assets.
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ADDITIONAL ALLOWABLE DEDUCTIONS – In the case of securities held by licensed dealers or financial institutions are treated as ordinary assets, and any losses from worthless securities are considered ordinary losses deductible from taxable income. Additionally, under Section 9 of the CMEPA, 50% of an employer’s contribution to a PERA account is allowed as an additional deduction from gross income, subject to compliance with legal requirements.
ENTITIES ALLOWED TO CLAIM LOSSES FROM WASH SALES OF STOCK OR SECURITIES AS AN ALLOWABLE DEDUCTION. – Entities or financial intermediary licensed to trade securities, not just dealers, may claim deductions for losses from wash sales under Section 34 of the Tax Code, provided the losses arise from transactions made in the ordinary course of their business.
NON-APPLICABILITY OF THE LIMITATION ON CAPITAL LOSSES TO DEALER IN SECURITIES OR OTHER FINANCIAL INTERMEDIARY. – The capital loss limitation under Section 39(C) of the Tax Code does not apply to licensed dealers or financial intermediaries trading in securities, specifically when selling debt instruments like bonds or notes with interest coupons or in registered form.
SOURCES OF INTEREST INCOME IN THE PHILIPPINES. – Pursuant to Section 12 of the CMEPA, amending Section 42 of the Tax Code, interest income from debt instruments, bank deposits, deposit substitutes, trust funds, and other similar arrangements, such as bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, regardless of the place of execution of said instruments, including debt instruments or debt securities issued by the government or any of its agencies or instrumentalities, are also considered sourced within the Philippines.
TRANSITORY PROVISION (Effective July 1, 2025) – Tax exemptions or preferential rates on financial instruments issued before July 1, 2025 will continue to apply for the remaining maturity of the original agreement, provided:
- The instrument was issued before July 1, 2025.
- The maturity date extends beyond July 1, 2025.
- There is no change to the original terms—no renewal, extension, or reissuance after July 1, 2025..