The higher tax on time deposit interest has been implemented starting July 1, 2025. According to banks such as Metrobank, UnionBank, and Security Bank, all interest from peso and dollar deposits, including time deposits, will now be subject to a 20% final withholding tax, regardless of how long it has been deposited.
Previously, there were deposits that were tax-free, especially if they were over five years. For example, 0% tax for over 5 years, 5% for 4–5 years, and 12% for 3–4 years. Now, a flat 20% tax will be imposed on all long-term deposits placed since July 1. Also, foreign currency deposits, from the previous 15%, have been reduced to 20%.
Deposits placed before July 1, 2025 are not affected. They will remain taxed until the maturity date. If there is a valid tax exemption from the BIR, they will still be taxed.
The new law Capital Markets Efficiency Promotion Act (CMEPA) aims to make the system for taxing income from financial investments simpler, more consistent, and more predictable. According to banks, investors will benefit from this reform because it is in line with global standards.
The CMEPA is a step towards a modern financial tax system. The computation of interest tax is now clearer, and all types of deposits are treated equally.
