Starting July 1, 2025, major Philippine banks began applying a flat 20% final withholding tax on all interest income from deposit products. The change comes from Republic Act No. 12214, also known as the Capital Markets Efficiency Promotion Act (CMEPA).
Previously, interest income was taxed according to how long deposits were held:
- 5 years or more: Tax-exempt
- 4–5 years: 5% tax
- 3–4 years: 12% tax
- Less than 3 years: 20% tax
The new rule applies to all new deposit transactions, both peso and foreign currency, on or after July 1. Legacy deposits made before that date will retain their original tax until they mature.
According to the Bureau of Internal Revenue (BIR), the reform simplifies the tax structure on passive income, encourages investment, and brings Philippine banking practices closer to international standards.
Metrobank, Security Bank, and UnionDigital Bank have confirmed compliance with CMEPA and issued advisories to their respective clients. Financial institutions stress that the 20% tax only applies to new deposits, ensuring existing accounts remain unaffected.
What do you think of the new tax policy on deposit products? Share your thoughts below.
