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𝗖𝗠𝗘𝗣𝗔 𝗮𝗻𝗱 𝘁𝗵𝗲 𝟮𝟬% 𝘁𝗮𝘅: 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀 𝗳𝗼𝗿 𝘆𝗼𝘂𝗿 𝗯𝗮𝗻𝗸 𝘀𝗮𝘃𝗶𝗻𝗴𝘀
July 17, 2025 | 1:57 PM
MANILA, Philippines — Netizens were in an uproar when banks implemented new tax rates on savings interest, prompting many to ask: “What’s going to happen to my savings?”
The changes stem from the Capital Markets Efficiency Promotion Act (CMEPA), a new law signed by President Ferdinand Marcos Jr. in May and enacted in July. It aims to introduce key reforms to level the playing field in trade and investment. One such reform is the reduction of the Stock Transaction Tax (STT) from 0.6% to 0.1%.
However, what triggered the uproar is the uniform 20% tax rate on interest income.
The Department of Finance (DOF) has since clarified misconceptions fueled by social media buzz, especially the mistaken belief that people’s actual bank savings are being taxed 20%.
In reality, it’s not the money in your account being taxed, but the interest it earns while sitting in the bank. The DOF also emphasized that this is not a new tax, but an existing one that has now been standardized under CMEPA.
“1998 pa lang, may 20% tax na ang interest na kinikita ng ating mga karaniwang deposito sa bangko,” the DOF said in a Facebook post.
(As early as 1998, there was already a 20% tax on our interest being made by ordinary deposits in the bank.)
The DOF summarized the new tax rates as follows:
Deposits | Tax rates before the CMEPA | Tax rates after the CMEPA
Maturity of more than 5 years
- Before CMEPA: No taxes
- After CMEPA: 20%
Maturity of 4 to 5 years
- Before CMEPA: 5%
- After CMEPA: 20%
Maturity of 3 to 4 years
- Before CMEPA: 12%
- After CMEPA: 20%
Maturity of 3 or less years
- Before CMEPA: 20%
- After CMEPA: 20%
Foreign Currency Deposit Unit (FCDU)
- Before CMEPA: 15%
- After CMEPA: 20%
A table showing the new tax rates on interests
The DOF argued that the old system favored those who are richer, as their studies showed that they are the ones holding long-term deposits (TD).
Rizal Commercial Banking Corp. chief economist Michael Ricafort told Philstar.com that the impact will likely be felt more by those with Foreign Currency Deposit Unit (FCDU) accounts and US dollar time deposits.
“TD amounts become bigger, in terms of the larger interest income generated and now the higher 20% withholding tax that these are subjected to since July 1, 2025,” he said.
“But for smaller amounts, the changes could be minimal/negligible,” Ricafort said.
𝐖𝐡𝐚𝐭 𝐜𝐚𝐧 𝐭𝐡𝐞 𝐩𝐮𝐛𝐥𝐢𝐜 𝐠𝐚𝐢𝐧 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐂𝐌𝐄𝐏𝐀?
While the CMEPA would certainly make the Philippines more appealing to investors after the lowering of several investment taxes, how could it help the common Filipino who wants to simply earn money?
The DOF argued that the CMEPA would encourage ordinary Filipinos to invest and diversify their income sources. Other than the reduction of the STT, the CMEPA also decreased the documentary stamp taxes (DST) rate from 1% to 0.75%, as well as removing it completely from the collective investment schemes.
“These measures are seen to cut transaction costs, encourage market participation and financial planning, boost market liquidity, make the country’s equities market regionally competitive, and increase capital market growth,” the DOF said in a statement.
Ricafort agreed with the DOF, saying that local investors would have more choices in diversifying their investments with hopes of generating more returns.
While the CMEPA may ease investment, the question of whether or not the average Filipino is willing to invest their money in the current economic environment remains, especially amid inflation and global uncertainties.
Ricafort said that now is still a conducive time for investing.
“Bond yields near cycle/multi-year highs that are favorable for investors,” he said.
What can the public do to mitigate CMEPA’s impact?
While smaller savings accounts may not feel the effects of the CMEPA, some have raised that middle-class earners who wish to save more money in the long run are more likely to feel the effects of the CMEPA.
Ricafort advised that they could seek alternative means to save or invest their money. He said that savers could try out a Personal Equity and Retirement Account (PERA). A PERA account is a voluntary retirement savings account that could supplement your SSS.
Investment is also an option, but Ricafort warned newcomers to be cautious.
“This is investment related, not deposits, that are subject to market conditions or higher risk-higher return trade off as a source of diversification,” Ricafort said.
