MANILA, Philippines – Public reactions have been mixed, but a significant number of Filipinos have expressed concern and frustration over Republic Act No. 12214, known as the Capital Markets Efficiency Promotion Act (CMEPA).
Fact Check: RA 12214 was principally authored by Rep. Joey Salceda in the House. In the Senate, it’s Sen. Sherwin Gatchalian, co-sponsored by Sen. Joel Villanueva. Department of Finance (DOF) Secretary Ralph Recto is a key supporter and responsible for implementing the law, not its author.
Although it officially took effect this July, the law was enacted as early as May 29, 2025.
According to DOF, the 20% tax on interest earned from bank deposits has actually been in place since the tax reform laws passed in 1997. The DOF clarified that many of the claims circulating online are inaccurate. Contrary to what some netizens believe, the 20% tax does not apply to the total savings amount, but only to the interest income generated.
DOF has refuted these claims, stating that the public has largely misunderstood the policy.
In a set of infographics released and uploaded on the DOF’s official Facebook page, the agency clarified the misconceptions surrounding the issue.
"Mahalagang malaman na hindi ito bagong buwis at layunin lamang nito sa ilalim ng CMEPA na gawing pantay at patas ang pagbubuwis sa interest mula sa savings ng mga mamamayan,” they said.
"Bukod dito, hindi binubuwisan ang kabuuang halaga ng perang naka-deposito sa bangko. Sa halip, ang interes lamang na kinikita nito ang binubuwisan."
"Ang CMEPA ay dumaan sa masusing pag-aaral ng kongreso bago naisabatas noong May 29, 2025."
"Ipinapaalala ng DOF na maging mapanuri sa mga articles at posts na kumakalat online na ginawa para magpakalat ng maling impormasyon," they emphasized.
Previously, the tax on interest earnings varied depending on the maturity period of the deposit. But under the new law, a flat 20% tax rate now applies across the board, regardless of whether the maturity period is less than three years or more than five.
The DOF also explained the rationale behind the passage of the new law.
First, the previous system was deemed unfair. Based on studies and available data, those who held long-term deposit accounts with higher maturity periods were mostly wealthy individuals. In effect, the rich were the ones benefiting from “special treatment” through preferential rates, either by paying lower taxes or none at all.
In simple terms, the CMEPA was designed to correct this imbalance. The aim was to level the playing field by removing provisions that disproportionately favored the wealthy, who could afford to keep their money parked in banks for extended periods without needing to access it.
The DOF also released a series of infographics explaining the final withholding tax on interest income from savings under the CMEPA.
According to the infographics, there will be no changes to the tax imposed on regular savings accounts, the 20% final withholding tax remains the same as before.
For peso time deposits with a maturity of less than five years, the final tax on interest income is now set at a flat 20%. The same rate also applies to time deposits with a maturity of five years or more, which were previously tax-exempt.
Meanwhile, interest income earned from time deposit products under Pag-IBIG, SSS, and GSIS remains unaffected by the changes—they are still tax-exempt.
But how exactly does the 20% tax on interest from bank savings work?
Let’s say a bank depositor has ₱200,000 in a trusted bank with an annual interest rate of 2%. That means the savings would earn ₱4,000 in interest over one year. However, 20% of that interest, or ₱800, will be deducted as tax. This leaves the depositor with a net interest income of ₱3,200.
Again, it’s important to note that the 20% tax is not deducted from the ₱200,000 principal (or whatever amount is in the savings account), but only from the interest earned.
— Noel Ed Richards, The Summit Express