The Department of Finance (DOF) clarified on Thursday that the Capital Markets Efficiency Promotion Act (CMEPA) or RA 12214 'does not impose a new tax,’ contrary to misleading claims circulating online.
In a statement, the DOF said CMEPA only standardizes the 20% tax on interest income from bank deposits, correcting an ‘unfair system that favored the wealthy’ through lower tax rates on long-term deposits.
“It corrects an unfair system and levels the playing field,” the DOF said, adding that only interest earnings, not the savings themselves, are taxed.
According to the National Internal Revenue Code of 1997, it imposed a 20% final tax on interest income from bank deposits with a maturity of less than three years.
While short-term deposits less than three years were already taxed at 20%, long-term deposits received preferential treatment, with deposits maturing in over five years being tax-exempt, and those between three to five years subject to rates as 5% to 12%.
In a report by RH Boy Gonzales, DOF claimed that prior to CMEPA, wealthier depositors were able to benefit from preferential tax rates, or in some cases, zero tax, advantages that were not available to most Filipinos.
“The CMEPA merely corrects this outdated and inequitable system that placed a heavier burden on ordinary Filipinos who do not have the extra cash to put in banks for longer periods,” DOF stated.
The agency further noted that over 99.6% of deposits were already taxed at this rate, while high-value long-term deposits previously enjoyed preferential or zero tax.
“This special tax treatment favored depositors who can afford to park their savings in long-term deposits, making the tax system unfair for short-term depositors,”
Moreover, the DOF explained that long-term deposits made before July 1, 2025, will keep their current tax benefits until maturity, while SSS, GSIS, and Pag-IBIG (e.g., MP2) savings remain tax-free.
CMEPA also aims to boost market participation by reducing stock transaction taxes, removing stamp duties on investment funds, and encouraging retirement savings.
The law was passed after extensive Congressional review and deliberation before being signed into law on May 29, 2025.
