Starting July 2025, banks in the Philippines began implementing a uniform 20% final withholding tax (FWT) on all interest income from bank deposits. This follows the passage of the Capital Markets Efficiency Promotion Act (CMEPA), signed into law by President Ferdinand Marcos Jr. in May.
Only Interest Earned, Not Your Savings, Is Taxed
According to the Department of Finance (DOF), only the interest you earn from your bank savings is subject to the 20% tax. For example, if you have ?100,000 in a savings account and it earns ?1,000 in interest, only that ?1,000 will be taxed ?200—not your full deposit.
“Hindi binubuwisan ang kabuuang halaga ng perang naka-deposito sa bangko,” the DOF clarified. “Ang interes lamang na kinikita nito ang binubuwisan,” they added.
Goodbye Tiered Tax Rates, Hello Fairer System
Before CMEPA, tax rates depended on how long your money stayed in the bank:
- * 20% for deposits under 3 years
- * 12% for 3 to <4 years
- * 5% for 4 to <5 years
- * 0% for 5 years or more
- * 15% for foreign currency accounts
Now, under CMEPA, all interest income is taxed at 20%, regardless of the term or currency. The DOF said this levels the playing field, especially for small savers who can't afford to lock their money in long-term deposits.
Exemptions and Capital Market Benefits
The DOF clarified that Pag-IBIG MP2, SSS Provident Funds, and other government-mandated savings programs are exempt from the new tax.
CMEPA also slashed the stock transaction tax from 0.6% to 0.1%, reduced documentary stamp taxes, and aims to make investing more attractive by lowering costs in the capital market.
The government expects to raise ?9 billion in revenue from CMEPA by 2028, helping boost economic development without taxing your hard-earned savings directly.
