Major Philippine banks have already started implementing a uniform 20% final withholding tax on interest income from deposit products, effective July 1.
Photo: Unsplash
This implementation follows the effectivity of Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act (CMEPA), which aims to level the playing field when it comes to taxing income from financial investments. It also aims to simplify the tax structure on passive income, which aligns with international standards.
Before July 1, peso time deposits held for five years or more were exempt from final withholding tax (FWT). Deposits with maturities of four to less than five years were taxed at 5%, those held for three to less than four years at 12%, and those with maturities of less than three years were subject to a 20% tax.
What you need to know
Several local banks have confirmed that interest income from both peso and foreign currency accounts is now subject to a uniform 20% final withholding tax.
In an advisory published by Metrobank, the bank affirmed that reform “benefits both institutional and individual Filipino investors who seek to grow and diversify their investment portfolio.”
For those availing of Metrobank’s financial products and services, the new tax rates under the CMEPA have been in effect since July 1, 2025:
Photo: Metrobank/Website
Security Bank has also followed suit, explaining that CMEPA aims to modernize the Philippine capital markets by “making investment channels more affordable and accessible” to more Filipinos, ultimately encouraging local investment.
For those availing of Security Bank’s financial products and services, the new tax rates under the CMEPA have been in effect since July 1, 2025:
Photo: Security Bank/Website
The bank noted that new transactions made on or after July 1, 2025, will be subject to the new tax, but those with outstanding investments that have not yet matured will still be subject to the previous tax.
Finally, UnionDigital Bank informed its customers that there would be a flat 20% withholding tax on all interest income from their deposit accounts, regardless of holding period. However, deposits issued before July 1, 2025, will continue to follow the previous tax rules until maturity.
For those availing of UnionDigital Bank’s financial products and services, the new tax rates under the CMEPA have been in effect since July 1, 2025:
Photo: UnionDigital Bank/Website
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