Capital Gains Tax on Foreign Corporation Shares Under CMEPA: The New 15% Rule

CMEPA — Republic Act No. 12214, the Capital Markets Efficiency Promotion Act — extended the flat 15% capital gains tax to shares of stock in a foreign corporation that are not traded through any stock exchange, effective July 1, 2025. Before this change, a Filipino resident selling shares in an unlisted foreign company reported the gain as ordinary income, taxed at graduated rates of up to 35%. Under CMEPA, that gain is now taxed the same way unlisted domestic shares already were: a flat 15% of net capital gain.

This guide covers what CMEPA changed for foreign corporation shares specifically, how the 15% tax is computed, what happens instead if those shares trade on a foreign stock exchange, and a worked example for a resident individual selling shares in an unlisted foreign holding company. For the law’s other capital-market changes, see What Is the CMEPA Act? A Guide to BIR Tax Changes Under RA 12214; for the parallel rule on domestic unlisted shares, see BIR Form 1707: Capital Gains Tax Return for Shares of Stock Not Traded on the Stock Exchange.

What did CMEPA change for shares of a foreign corporation? #

CMEPA brought shares of stock in a foreign corporation into the same 15% capital gains tax bracket that already covered unlisted domestic shares, closing a gap where the two were taxed under entirely different regimes. Before CMEPA, Section 24(C) of the National Internal Revenue Code (NIRC) imposed the flat 15% capital gains tax only on shares of a domestic corporation not traded through the local stock exchange; gains from foreign corporation shares fell instead under the general income tax rules, taxed as ordinary income alongside salary, business income, and other regular earnings. CMEPA removed that distinction for shares not traded on any exchange, taxing domestic and foreign corporation shares the same way.

RA No. 12214 was signed into law on May 29, 2025, and took effect July 1, 2025. Its own opening section states its short title plainly:

“SECTION 1. Short Title. — This Act shall be known as the ‘Capital Markets Efficiency Promotion Act.’”

The BIR’s implementing Revenue Regulations No. 21-2025, issued August 5, 2025, carries out CMEPA’s amendments to NIRC Sections 22, 24, 25, 27, 28, 32, 34, 38, 39, and 42 — the cluster of provisions covering income classification, capital gains, corporate income tax, and gross income rules that CMEPA touched. Because the exact language the BIR used to amend Section 24(C) itself was not independently confirmed against the primary regulation text for this article, the rate and scope above are stated based on consistent reporting from multiple tax advisory sources rather than a direct quote of the amended provision — treat the short-title excerpt above as the verified verbatim text, and the mechanics described here as the corroborated rule.

How is the 15% capital gains tax computed on foreign shares? #

The computation mirrors the existing rule for unlisted domestic shares: 15% of the net capital gain, which is the selling price less the seller’s documented cost basis in the foreign shares. Unlike the old ordinary-income treatment, there are no graduated brackets and no combining the gain with the seller’s other income for the year — it is a final, flat-rate tax on that one transaction, the same structure already used for BIR Form 1707 filings on domestic unlisted shares.

Because unlisted foreign shares don’t have a public quoted price on a Philippine exchange, sellers should expect the same documentation scrutiny the BIR already applies to unlisted domestic shares — proof of acquisition cost, the transfer document, and the foreign company’s latest available financial statements to support the reported value.

What if the foreign shares trade on a foreign stock exchange instead? #

Shares that trade through a foreign stock exchange are carved out of the 15% capital gains tax entirely and instead follow the same stock transaction tax CMEPA already applies to Philippine Stock Exchange trades. CMEPA extended the 0.1% stock transaction tax — cut down from 0.6% for PSE-listed shares, as covered in BIR Form 2552: The Stock Transaction Tax, Now 0.1% Under CMEPA — to sales of shares through a foreign stock exchange as well. That means a Filipino resident selling shares listed on a foreign bourse pays 0.1% of the gross selling price as a final percentage tax, not 15% of the gain.

This three-way split matters because the tax base and the tax itself are completely different depending on where — or whether — the shares actually trade: a percentage of the sale price either way for exchange-traded shares, versus a percentage of the profit for shares that change hands privately.

Worked example: selling shares in an unlisted foreign holding company #

A Filipino resident individual bought 5,000 shares in a Singapore-incorporated holding company several years ago for ₱800,000 and now sells the entire block privately to another investor for ₱2,000,000 — the shares were never listed on any stock exchange, local or foreign.

Under the pre-CMEPA rule, that ₱1,200,000 gain would have been folded into the seller’s regular taxable income for the year and taxed at graduated rates alongside salary or business income — potentially pushing a chunk of it into the top 35% bracket. Under CMEPA, the same gain is taxed once, at a flat 15%, regardless of what else the seller earned that year — a materially lower and more predictable liability in this scenario.

Which BIR form reports this, and when? #

Gains on foreign corporation shares not traded on any exchange are reported through the same capital gains tax return process already used for unlisted domestic shares — a per-transaction filing due within a short window after the sale, plus an annual consolidation. BIR Form 1707 is the per-transaction Capital Gains Tax Return, historically filed within 30 days of each sale of unlisted shares; BIR Form 1707-A consolidates all such sales for the year.

Because CMEPA changed the underlying NIRC provision rather than immediately republishing every form, sellers of foreign corporation shares should confirm with their RDO or a tax professional that the current form version and any related RMC explicitly cover foreign-issued shares before relying solely on this article to self-file — the rate and tax base described above are well-corroborated, but the precise line-item mechanics on the form itself were not independently verified for this post.

Frequently asked questions #

Did CMEPA change the tax on selling shares in a foreign corporation? #

Yes. Effective July 1, 2025, RA No. 12214 (CMEPA) subjects gains from selling shares of stock in a foreign corporation not traded through a local or foreign stock exchange to a flat 15% capital gains tax, the same rate that already applied to unlisted domestic shares.

How were gains on foreign corporation shares taxed before CMEPA? #

Before CMEPA, gains from selling unlisted foreign corporation shares were treated as ordinary income for a resident individual or domestic corporation, taxed at graduated rates of up to 35% for individuals or the regular corporate income tax rate, rather than at a flat capital gains rate.

What if the foreign shares are traded on a foreign stock exchange? #

CMEPA extends the same 0.1% stock transaction tax that applies to Philippine Stock Exchange trades to sales of shares through a foreign stock exchange, so exchange-traded foreign shares fall outside the 15% capital gains tax and are instead subject to that percentage tax on the gross selling price.

Which BIR form reports capital gains tax on foreign corporation shares? #

Gains on shares not traded through any exchange are reported through the same capital gains tax return process used for unlisted domestic shares — BIR Form 1707 per transaction and BIR Form 1707-A for the annual consolidation — since CMEPA amended the underlying NIRC provision that both forms implement.

Summary #

CMEPA closed a long-standing gap in how the Philippines taxed shares in a foreign corporation: gains that used to ride along with a seller’s ordinary income at rates up to 35% are now taxed at a flat 15%, the same rate unlisted domestic shares already carried, effective July 1, 2025. Shares that trade through a foreign stock exchange get a different treatment again — a 0.1% stock transaction tax on the sale price, extended from the rule already covering the Philippine Stock Exchange. Anyone holding shares in an unlisted foreign company should re-check which of these three regimes now applies before assuming the old ordinary-income math still holds — start with What Is the CMEPA Act? A Guide to BIR Tax Changes Under RA 12214 for how this fits alongside CMEPA’s other changes.