Major Philippine banks have begun applying a flat 20% final withholding tax (FWT) on interest income from deposit products. The Capital Markets Efficiency Promotion Act (CMEPA), or Republic Act No. 12214, which took effect on 1 July 2025, implements such changes in tax in the Philippines.
Metrobank, UnionBank, and Security Bank have confirmed that this new uniform rate now applies to interest earnings from both peso and foreign currency accounts, regardless of term or currency.
This replaces the country’s previous tiered and preferential tax system. Prior to 1 July 2025, peso time deposits held for five years or more were exempt from FWT, with other maturities taxed at graduated rates from 5% to 20%.
Interest on foreign-currency time-deposit accounts was previously subject to a 15% FWT for resident investors.
The CMEPA aims to simplify the tax structure on passive income, reduce friction costs, and align with international standards.
Metrobank, in an advisory, stated that CMEPA “seeks to simplify the tax treatment of passive income and capital market transactions, reducing investor costs, and aligning the country’s tax policies with international standards”.
Security Bank also noted that CMEPA will help to bring the Philippines in line with global practices.
For existing investments made before 1 July 2025, banks clarified that their original tax treatment will be retained until maturity. For example, peso long-term deposits placed before this date will continue to follow the graduated tax schedule.
The Department of Finance (DOF) clarified that this 20% tax is not a new tax but a standardisation of an existing one.
The DOF stated, “As early as 1998, there was already a 20% tax on our interest being made by ordinary deposits in the bank.
The Philippines CMEPA also includes other provisions, such as the reduction of the Stock Transaction Tax (STT) from 0.6% to 0.1% , and the exemption of documentary stamp tax (DST) on the issuance and redemption of Mutual Fund shares and UITF units.
The DOF suggests these measures will cut transaction costs, encourage market participation, and boost capital market growth.
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