Starting July 1, 2025, PH Gov’t to Collect 20% Tax From Bank Interest Earnings
The Philippine government will start collecting a 20 percent tax on bank interest earnings beginning July 1, 2025.
A new rule on bank interest earnings is now in place as the government begins collecting a 20% final withholding tax from long-term deposits and peso-denominated bonds. The change is part of the implementation of Republic Act No. 12214, also known as the Capital Markets Efficiency Promotion Act, which officially took effect on July 1, 2025.
The Department of Finance explained that this isn’t a new tax, but a correction to the previous system where some investment earnings were exempt. The aim is to make the tax system fair and uniform for all types of passive income from financial investments.
According to major banks like Metrobank, UnionBank, and Security Bank, all interest earned from both peso and dollar deposits including time deposits will now be subject to a flat 20% tax.
It means that even long-term deposits that used to be tax-free if held for more than five years are now included in the new rule.
Before the law, tax rates on interest earnings depended on how long the money stayed in the bank. For example, deposits over five years had zero tax, while those held for 3–4 years were taxed at 12%.
With the new law, any deposit made from July 1 onward will have a 20% tax, regardless of the term.
However, deposits placed before July 1, 2025, will not be affected. These will still follow the old tax rates until they mature. Deposits with valid tax exemptions from the Bureau of Internal Revenue will also continue to enjoy tax-free status.
The government hopes that this updated system will make taxes on investments simpler and fairer for both individuals and institutions, while aligning the country’s financial practices with international standards.
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The social media users expressed their reactions to the announcement:
