Palace overturns panic over claims of 20% tax imposed on bank savings

Abdiel Franz Bernales

Malacañang debunked misleading claims online on July 18, clarifying that a 20 percent tax will be imposed only on the interest earned, not the total amount in the account, and not on bank savings.

This clarification came after the public had been thrown into a state of panic following the spread of misleading posts about RA 12214 or the Capital Markets Efficiency Promotion Act (CMEPA), signed into law by President Ferdinand "Bongbong" Marcos Jr. last May and took effect this month of July.

In a press briefing, Palace Press Officer Claire Castro warned the public against "fake news" about the 20 percent final tax on interest income from bank deposits.

“Bakit nga ba sinabi nating fake news ito na hindi dapat ikaaalarma ng taumbayan? Ang papatawan ng buwis ay hindi savings, kundi ang interest na kinikita sa ating savings. Hindi po kailan man mababawasan ang ating savings dahil lamang sa sinasabing pagbubuwis,”  Castro said.

She also emphasized that the 20 percent tax on interest earnings from bank deposits is not new, as it has been in place since 1998, before the enactment of the CMEPA.

Then she advised the public to be more discerning about what they read and share on social media, considering that there are many "fake news peddlers and obstructionists" who are fabricating stories to sow confusion.

“Iniiba nila ang kwento. Alam naman natin at alam nila ito pero pilit nilang binabaluktot ang katotohanan para sirain ang tiwala ng taumbayan sa administrasyon. Tulad nang sinabi natin, makikita po ito sa inyong passbook o bank statement. Ang kaibahan lamang ngayon ay ang pagtanggal ng preferential rates sa mga deposito na lock-in sa mas matagal na maturity than three years,” Castro said.

More than 99.6 percent of total deposits were already subject to the 20 percent tax rate, while only 0.4 percent enjoyed preferential rates, according to the data from the Bangko Sentral ng Pilipinas (BSP).

Castro explained that there will be no deduction in Php 100,000 worth of savings, saying that only Php 16.66 will be deducted from the Php 83.33 worth of interest earned.

She said the uniform 20 percent tax rate on interest income would be a "big help" to the government.

“Ang halagang ito ay malaking tulong na sa ating mga kababayan bilang kontribisyon na mapupunta sa programa ng pamahalaan na layunin iangat ang pamumuhay ng bawat isa,” she stated.

Further, the Department of Finance (DOF) has since clarified that only the interest earned from a depositor's savings in a bank is taxed at 20 percent, and not the amount of savings itself.

Under CMEPA, all interest income deposited in banks is subject to a 20 percent withholding tax, which local banks began implementing on July 1, 2025.

"A final tax of 20 percent is hereby imposed upon the amount of interest yield, or other monetary benefit earned or received from any currency bank deposit, deposit substitute, trust fund, or other similar arrangements," Section 6 of the measure reads.

CMEPA amended several provisions of the National Internal Revenue Code, namely sections 22, 24, 25, 27, 28, 32, 34, 38, 39, 42, 51, 56, 57, 127, 149, 174, 176, 179, 190, 199, and 259, to "harmonize" and simplify taxation of passive income across financial instruments in a bid to encourage wider public participation in the country's capital markets.

The law defines "passive income" as any income earned from sources that do not require a taxpayer's active pursuit and performance of trade or business.