Understanding CMEPA: A Tax Reform to Benefit Filipino Investors

Here’s what you need to know about the new Final Withholding Tax rules starting July 1, 2025

A new tax policy will take effect on July 1, 2025, that will impact interest income earned from deposits and investments across the country. This change is part of the implementation of Republic Act No. 11214, more commonly known as the Capital Markets Efficiency Promotion Act (CMEPA).

The law aims to simplify the tax structure and promote greater participation in the Philippine financial market by removing complex exemptions and adopting a more uniform system.

What’s Changing?

Beginning July 1, all interest income from deposit accounts—regardless of their term—will be subject to a flat 20% Final Withholding Tax (FWT). This marks a shift from the graduated tax rates that previously applied to long-term time deposits.

Previously, investors who held deposits for at least five years enjoyed a 0% tax rate, with lower rates also available for placements held for three years or more. Under the new guidelines, these preferential rates will no longer apply to new placements made after the cut-off date.

What Happens to Existing Deposits?

If you already have deposits or investment accounts opened before July 1, 2025, you don’t need to worry. These will continue to follow the current graduated tax schedule until they mature. The applicable tax rate will depend on the original holding period, as shown below:

• 5 years or more – 0%
• 4 to less than 5 years – 5%
• 3 to less than 4 years – 12%
• Less than 3 years – 20%

This ensures that your existing long-term savings and investments are protected under the terms you originally agreed to.

Why This Matters

By shifting to a standardized tax rate, CMEPA aims to encourage a more transparent and efficient financial system. For depositors and investors, this means it’s more important than ever to understand how your funds are placed and how long you intend to keep them invested.

With this in mind, Enterprise Bank encourages clients to review their deposit accounts and speak with branch representatives if they have any questions or concerns.

Plan Ahead with Enterprise Bank

We remain committed to keeping you informed and supported throughout these changes. Whether you’re planning to open a new time deposit or evaluating your current savings, our team is ready to assist you every step of the way.