Government Clears Up Confusion on 20 Percent Tax
MANILA, Philippines — Authorities have clarified widespread confusion surrounding the 20 percent tax on interest earnings from bank savings. Contrary to viral posts, the government emphasized that this tax applies only to the interest income, not the entire savings amount.
Many Filipinos panicked after misleading information about the Capital Markets Efficiency Promotion Act (CMEPA), effective July 1, circulated online. Officials urgently addressed these concerns to ease public anxiety.
Understanding the 20 Percent Tax on Interest Earnings
“What will be taxed is not the savings themselves, but the interest earned from our savings. Our savings will never be reduced just because of this so-called taxation,” explained a palace spokesperson during a briefing.
To illustrate, if you save ₱100,000 with a 1 percent monthly interest rate, you earn ₱83.33 as interest each month. The tax will only be deducted from this interest, not the principal amount. Thus, just ₱16.66 will be taken for taxes, leaving your initial savings untouched.
Tax Contributions and Historical Context
This tax on interest earned plays a significant role in funding government programs, sources noted. The 20 percent rate is not new; it has been in place since 1998.
The key change under CMEPA is the removal of preferential tax rates for deposits locked in for longer terms. Previously, those who committed their funds for five years or more enjoyed lower taxes because their deposits were treated as investments rather than regular savings.
“The only difference now is the removal of preferential rates for deposits that are locked in for longer maturities. These are for those who availed of long-term investments — in other words, they won’t withdraw their money for five years, so they earn higher interest because it’s considered an investment, not just regular savings,” local leaders observed.
In summary, Filipinos should understand that this tax policy targets only the earnings generated from their bank deposits, not their original savings.
For more news and updates on 20 percent tax on interest earnings, visit Filipinokami.com.
