Filipinos Face 20% Tax on Bank Interest

Explainer: 20% Tax on Bank Deposit Interest Under CMEPA – What Every Filipino Saver Needs to Know

JULY 17,2025

MANILA, Philippines – The Capital Market Efficiency Promotion Act (CMEPA) has stirred online debates, particularly over its impact on bank deposit interest income. But what’s really changing—and is this 20% tax new?

Here’s everything you need to know, especially if you’re a Filipino with savings in the bank.

What is CMEPA and Why is it in the Spotlight?

The Capital Market Efficiency Promotion Act (CMEPA) took effect on July 1, 2025, and it’s causing a stir because of the 20% interest income tax on bank deposits.

However, the Department of Finance (DOF) clarified that CMEPA does not impose a new tax. Instead, it standardizes an existing tax system that has been in place since 1998. The backlash, according to the DOF, is largely due to “fake news” and online misinformation.

How Does the 20% Interest Tax Work on Your Bank Deposits?

Let’s break it down.

If you have P100,000 in a savings account with a 2% annual interest, that earns you P2,000 interest in a year. With the 20% tax, P400 will be deducted, leaving you with P1,600 net interest income.

🟢 Key Point: The 20% tax only applies to the interest income, not the entire deposit amount.

Filipinos Face 20% Tax What Changed Under CMEPA?

Filipinos Face 20% Tax Before CMEPA

• Short-term deposits: Taxed at varying rates (5% to 20%)
• Long-term deposits (5+ years): Tax-exempt
• Dollar deposits: Taxed at 15%

After CMEPA

• All interest income is now taxed uniformly at 20%
• No more tax exemption for long-term deposits
• Level playing field: Everyone pays the same rate, whether they save short-term or long-term

The DOF said this reform removes the unfair advantage for wealthy individuals who could lock their money in long-term deposits just to avoid taxes. It also ensures simplified, transparent, and equitable taxation for all depositors.

Filipinos Face 20% Tax are Retirement and Government Savings Programs Taxed?

No. The 20% flat tax does not apply to:

• SSS (Social Security System)
• GSIS (Government Service Insurance System)
• Pag-IBIG MP2 and other provident savings programs

These government-backed savings programs remain tax-exempt, encouraging Filipinos to continue investing in their retirement and housing future.

Is the 20% Tax Retroactive?

No, the CMEPA provisions only apply to new deposits or financial instruments made after July 1, 2025. Any existing long-term deposit accounts opened before this date will keep their tax-exempt status until maturity.

Filipinos Face 20% Tax Final Thoughts: Should You Be Worried?

There’s no new tax—just a uniform tax rate to make the system fairer for everyone. The 20% tax on interest from bank deposits has always been there for most savers; CMEPA just removes the loopholes that benefited a small fraction of depositors.

If you’re an average saver with a regular savings account or time deposit, nothing really changes. But if you’re someone who has long-term deposits relying on tax-exempt interest, you’ll want to take note of the new rules for future placements. NOWTREND

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