The Department of Finance (DoF) clarified that the Capital Markets Efficiency Promotion Act (CMEPA) does not impose a new tax on interest income from short-term bank savings.

DoF said this is contrary to some online posts suggesting that the new law puts additional burden on lower income earners.

"CMEPA does not impose a new tax, instead standardized the tax rate on interest income to correct an unfair system that favored the wealthy," DoF said in a statement released Thursday.

CMEPA imposes a 20 percent tax on interest income for all types of deposits, regardless of their maturity periods.

Prior to CMEPA's effectivity on 1 July 2025, the National Internal Revenue Code of 1997 already stipulated a 20 percent tax on interest earned from bank deposits with a maturity of less than three years.

However, the old law demanded a lower tax rate of 12 percent for deposits with a maturity period of three to four years and 5 percent for deposits which will mature in four to five years. Those with a maturity period of more than five years were tax-exempt.

"This special tax treatment favored depositors who can afford to park their savings in long-term deposits, making the tax system unfair for short-term depositors who face liquidity issues and need immediate access to their funds," DoF said.

To also prevent confusion, the government agency stressed that the single tax rate applies only to deposits made on or after CMEPA's start of effectivity on 1 July 2025.

To encourage saving among Filipinos and expand options for alternative incomes, DoF added that the single tax rate does not apply to savings programs under the Social Security System, Government Service Insurance System, and Pag-IBIG Fund.