In recent weeks, social media has been awash with posts criticizing the government and government officials for allegedly imposing a 20% tax on bank deposits under the Capital Markets Efficiency Promotion Act (CMEPA) which took effect last 1 July 2025.
In this light, we would like to inform the public that first and foremost, there is no law imposing taxes on bank deposits.
What are subject of income taxes are interest income earned from such bank deposits under Republic Act No. 8424 (National Internal Revenue Code of 1997), which has been in effect since 1 January 1998.
Taxpayer |
Taxable Transaction |
Tax Rate under the 1997 Tax Code, amended |
New Rate under CMEPA |
Citizen or resident alien
|
interest derived from any currency bank deposit | 20% | No change |
| Individual (except nonresident) | interest income from a depository bank under the foreign currency deposit system | 15% | 20% |
Citizen, resident alien or nonresident alien engaged in trade or business in the Philippines |
interest income from long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas |
In general, exempt or if pre-terminated, subject to 5%, 12% or 20%, based on date of pre-termination |
20% |
Nonresident alien not engaged in trade or business in the Philippines |
interest derived from any currency bank deposit |
25% |
No change |
Domestic corporation |
interest derived from any currency bank deposit |
20% |
No change |
Resident foreign corporation |
interest derived from any currency bank deposit |
20% |
No change |
Nonresident foreign corporation |
interest received from Philippine sources |
25% |
No change |
With the foregoing discussion, we hope the public is enlightened that CMEPA did not impose a tax on bank deposits. As illustrated above, it merely modified the tax rates due on interest income from selected deposits and investments.
For any inquiry or request for assistance, please feel free to contact anyone from our Tax Services group or reach us through this link.
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