Clarification on Interest Income Tax: What Changed Under RA No. 12214 (CMEPA)?
- Yasser Aureada
- 10 hours ago
- 2 min read
With the effectivity of Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act (CMEPA), on July 1, 2025, many are asking whether the 20% tax on interest from time deposits is a new imposition. The short answer: no, it’s not new — but there is a major change in who is no longer exempted.
Here’s a clear breakdown.
Before RA No. 12214: Tax on Interest from Deposits
Under the old rule (Section 24(B)(1) of the NIRC, as amended by RA No. 8424 and RA No. 9504), interest income from regular savings, time deposits, and peso bonds was already subject to 20% final withholding tax (FWT).
However, there was a key exemption:Interest income from long-term deposits (at least 5 years)Â with BSP-certified instruments was exempt from FWT.
If the long-term deposit was pre-terminated, tax rates depended on the holding period:
Holding Period | Tax Rate Before RA 12214 |
5 years or more | 0% (Exempt) |
4 to less than 5 years | 5% |
3 to less than 4 years | 12% |
Less than 3 years | 20% |
After RA No. 12214 (Effective July 1, 2025)
RA No. 12214 removed the tax exemption on long-term deposits. Now:
All interest income from deposits, regardless of holding period or certification, is taxed at 20% FWT.
There is no more exemption even for 5-year BSP-certified long-term time deposits.
Holding Period | Tax Rate After RA 12214 |
Any duration | 20% |
What’s the Real Change?
The 20% tax rate is not new. What changed is that long-term deposit exemptions were repealed. Even those who used to be exempt under the 5-year rule are now fully taxed.
Practical Example
If you invest ₱100,000 in a 5-year time deposit at 6% annual interest:
Before RA 12214: You earned ₱6,000 tax-free
After RA 12214: You will still earn ₱6,000, but ₱1,200 (20%) will be withheld as tax
Disclaimer
This clarification is part of our commitment to public legal education and transparency. This blog is for general informational purposes only and does not constitute legal advice. For tailored guidance, consult a CPA lawyer.