# Impact of New PSE Stock Transaction Tax

The stock transaction tax will increase beginning January 2018 as part of the approved tax reform approved by Pres. Rodrigo Duterte.

The government’s tax reform program, dubbed as TRAIN or Tax Reform for Acceleration and Inclusion will reduce personal income tax rates of salaried employees, while increasing taxes charged on fuel, automobiles, sugar-sweetened beverages, and stock transactions, among others.

At present, the stock transaction tax amounts to 0.5% of the gross trade amount. This will increase to 0.6% in 2018 under the tax reform.

Below is the updated list of taxes and fees to be charged to stock traders in the Philippine Stock Exchange (PSE) beginning January 2018.

#### Fees and Charges in a PSE Stock Transaction (starting 2018)

PSE Trading Fees and ChargesAmountCharged to
Broker's CommissionMaximum of 0.25% of gross trade amount or P20.00, whichever is higherBoth Buyers and Sellers of stocks
VAT on Broker's Commission12% of Broker's CommissionBoth Buyers and Sellers of stocks
SCCP or Clearing Fee0.01% of gross trade amountBoth Buyers and Sellers of stocks
PSE Transaction Fee0.005% of gross trade amountBoth Buyers and Sellers of stocks
Stock Transaction Tax0.6% of gross trade amount (from 0.5% prior to 2018)Only charged to Sellers of stocks

For a detailed discussion about these stock charges, read our other article Sample Computation: PSE Stock Trading Fees and Charges.

Now, how will the increased stock selling transaction tax affect the cash proceeds available to sellers of stocks in the PSE?

We show below a sample computation. In this scenario, we assume that the broker’s commission is 0.25% and the seller is selling 10 shares of stocks at the price of P2,500:

#### Sample Computation: Selling P25,000 worth of shares

ItemCurrent FormulaCurrent AmountNew Formula (under 2018 Tax Reform)New Amount (under 2018 Tax Reform)
Gross Cash Proceeds from Sale of Stocks10 shares * P2,500 stock priceP25,000.0010 shares * P2,500 stock priceP25,000.00
Less: Broker's Commission0.25% * P25,000(62.50)0.25% * P25,000(62.50)
Less: VAT on Broker's Commission12% * P62.50(7.50)12% * P62.50(7.50)
Less: SCCP or Clearing Fee0.01% * P25,000(2.50)0.01% * P25,000(2.50)
Less: PSE Transaction Fee0.005% * P25,000(1.25)0.005% * P25,000(1.25)
Less: Stock Transaction Tax0.5% * P25,000(125.00)0.6% * P25,000(150.00)
NET CASH PROCEEDSP24,801.25P24,776.25

As we can see in the table above, the increased stock transaction tax resulted in lower cash proceeds to the stock seller.

Specifically, the seller received net cash proceeds of P24,776.25 from the sales transaction — lower by P25.00 compared to the proceeds of P24,801.25 under the previous formula. Of course, this P25.00 represents the increased stock transaction tax which will now go to government.

Here’s another example. Let’s look at the nominal impact of the higher tax in stock transactions amounting to P1 million.

#### Sample Computation: Selling P1 million worth of shares

ItemCurrent FormulaCurrent AmountNew Formula (under 2018 Tax Reform)New Amount (under 2018 Tax Reform)
Gross Cash Proceeds from Sale of Stocks10,000 shares * P100.00 stock priceP1,000,000.0010,000 shares * P100.00 stock priceP1,000,000.00
Less: Broker's Commission0.25% * P1,000,000.00(2,500.00)0.25% * P1,000,000.00(2,500.00)
Less: VAT on Broker's Commission12% * P2,500.00(300.00)12% * P2,500.00(300.00)
Less: SCCP or Clearing Fee0.01% * P1,000,000.00(100.00)0.01% * P1,000,000.00(100.00)
Less: PSE Transaction Fee0.005% * P1,000,000.00(50.00)0.005% * P1,000,000.00(50.00)
Less: Stock Transaction Tax0.5% * P1,000,000.00(5,000.00)0.6% * P1,000,000.00(6,000.00)
NET CASH PROCEEDSP992,050.00P991,050.00

For stock sales transactions amounting to P1 million, the impact of the additional stock transaction tax is a nominal P1,000.

Previously, sellers will get net cash proceeds of P992,050.00, but with the increased stock transaction tax, the net cash proceeds is now P991,050.00. The proceeds will be lower by P1,000 which will now go to the government.

In the end, the additional stock transaction tax (from 0.5% to 0.6% of the transaction amount) may not be a lot, but stock owners must always consider this tax. Otherwise, they might incur a loss, instead of realizing a profit, when selling stocks.

## PSEi support seen at 6,200 and 6,000 amid weaker Peso

In a not-so-surprising move, the U.S. Federal Reserve (Fed) yesterday raised interest rates by 75 basis points (bps) or 0.75% in a bid to tame rising inflation in the United States. This was the third consecutive 0.75% rate hike by the Fed, which brings the federal funds rate, the central bank’s benchmark interest rate, to ... Read more

## Official SWIFT Code of BDO, BPI, Metrobank, Philippine banks

When sending cash remittances or wire transfer to a bank account in the Philippines (such as BDO, BPI, Metrobank, Landbank, DBP, etc.), you’ll surely need the SWIFT Code of the bank. Look no further because you can find all the SWIFT Codes you need in this list! Make sure you’re using the right bank code ... Read more

## How to Waive your Credit Card Annual Fee (BDO, BPI, Metrobank, RCBC, Citibank, UnionBank)

Without a doubt, one of the most annoying fees that credit cardholders have to pay is the annual fee. Majority of cardholders are familiar with this fee and majority of us likely pay this grudgingly year after year after year. In the case of my credit card with BPI (Bank of the Philippine Islands), I’m ... Read more

## Why Filipinos do not become business owners or entrepreneurs

For a majority of Filipinos, entrepreneurship does not seem to be a typical, expected path. This is not surprising, considering that in school, students are primarily taught to become employees after graduation. Students train for years to become staff workers, reporting to a supervisor, and just waiting to receive their wages or salaries every month. ... Read more

## My experience investing in Mutual Funds in the Philippines

I started investing in mutual funds when I was 22 years old. As an Overseas Filipino Worker (OFW) then, I was fortunate to be able to save some money at that young age because of my work abroad. One time while I was on vacation in the Philippines, I saw a large billboard in EDSA ... Read more

## Income Tax Tables in the Philippines (2022)

The Philippines’ new tax reform bill, known as TRAIN or Tax Reform for Acceleration and Inclusion, was signed into law on December 19, 2017 and its implementation began on January 1, 2018. What are the new income tax rates under the TRAIN law? How will TRAIN affect income taxes of individuals and corporations? How is the ... Read more

## PSE Stocks Performance under each Philippine President (1987-2021)

Did you know that Philippine stocks were able to achieve an astounding growth of 800% in a span of 30 years? From 1987 until 2018, the Philippine Stock Exchange index (PSEi) rose from 1,000 points to a peak of 9,000 points — generating a return of 800% over 30 years. (The PSEi is an index ... Read more

## SSL 2022: Salary Increases for Teachers, Nurses, Gov’t Employees

Good news to all government employees! There’s a new round of salary increases beginning January 1, 2022! Millions of employees of the Philippine government — including public school teachers, nurses and staff of government hospitals, and workers in local and national government agencies, etc. — will be getting an automatic salary adjustment this 2022 under ... Read more

## PSE Trading Hours in 2022: What time open, when closed?

Before you take the plunge into stock trading and investing, make sure you understand what stocks are and how the Philippine Stock Exchange (PSE) operates. Unlike other investments that are relatively safe, stock trading is risky and loss of money is a possibility. So before you deep dive into the exciting world of stock trading, ... Read more

## Price Floor and Price Ceiling of PSE Stocks

Trading bands in the PSE come in two forms: Price Ceiling, or the upper price limit, and Price Floor, or the lower price limit.