By Mike Villa-Real · Published on BusinessMirror July 31, 2025
A couple of weeks ago, my social media feed was flooded with posts claiming that our savings would now be taxed at 20 percent after the Capital Markets Efficiency Promotion Act (CMEPA) was signed into law.
Naturally, this sparked outrage, who wouldn’t be upset about taxes on their hard-earned money?
But here’s the thing: that’s not true.
Unfortunately, misinformation spread quickly, and emotions ran high.
So what is the CMEPA all about?
For sure, it was not designed to simply raise taxes on deposits and investments. In fact, its goal is quite the opposite: to simplify the tax system and encourage more Filipinos to explore capital market investments, which historically offer higher returns than traditional bank deposits.
Let’s set the record straight.
Your savings will not be taxed. And the Cmepa doesn’t affect withholding taxes on interest earnings for regular savings, checking and time deposits. It’s still at the same 20 percent since 1998.
The change applies only to long-term time deposits (LTTDs), which have a minimum of P100,000 locked in for at least five years. These deposits used to enjoy tax-free interest but, under the Cmepa, for new LTTDs opened starting July 1, 2025, interest earnings will now be subject to the same 20 percent tax.
Let’s be clear though: existing LTTDs opened before July 1, 2025 will still enjoy the old tax-free benefit. Further, these LTTDs make up just 0.4 percent of total bank deposits—a very small portion, mostly held by high-net-worth individuals.
Interest rates on foreign currency deposit units (FCDUs) are also affected. Under the Cmepa, the previous 15-percent tax on FCDUs aligned to 20 percent. The law removes the preferential treatment for foreign currency deposits.
So what’s the point of the CMEPA (Republic Act 12214)?
The CMEPA isn’t about penalizing savers: it’s about leveling the playing field and making capital markets more accessible to Filipinos. In fact, the law reduces taxes on many investment products. The documentary stamp tax (DST) on mutual funds and investment fund transactions are now waived. The stock transaction tax has been reduced from 0.6 percent to 0.1 percent.
These changes make it easier and more attractive for ordinary Filipinos to invest in mutual funds, Unit Investment Trust Funds, stocks and bonds. Mutual funds and stocks can yield 8 percent to 15 percent annually, depending on the fund and market conditions. Compare that to 3 percent to 4 percent on long-term deposits and you’ll see why capital markets are worth considering.
Is this only for the rich? Not at all.
You can start investing in capital markets for as little as P5,000—far less than the P100,000 minimum for long-term time deposits. Of course, capital markets carry some more risk, but they also offer higher potential returns. So, it’s best to diversify or have a mix of savings in both deposits and capital markets, depending on your risk appetite.
Where can you invest in the capital markets? ask your bank, its Trust Officer or a stock broker registered with the Philippine Stock Exchange. I’m sure they would be happy to help and explain your options.
Miguel Angelo “Mike” C. Villa-Real is a past president of the Bank Marketing Association of the Philippines and is currently its director for publicity. Villa-Real is also the head of Veterans Bank’s Marketing Communications and Consumer Protection Group. He can be reached at mcvillareal@veteransbank.com.ph. The writer’s views do not necessarily reflect those of the BusinessMirror and the BMAP.