Banks across the Philippines are now implementing a 20% final withholding tax on income from long-term time deposits and peso-denominated bonds, in accordance with the newly enacted Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act, which took effect on July 1.
Signed into law by President Ferdinand “Bongbong” Marcos Jr. in May, the measure aims to standardize tax rates across all types of passive income earned from various investment instruments, ensuring a more level playing field in the financial market.
According to the Department of Finance (DOF), the new law does not introduce a new tax, but rather corrects inconsistencies in the previous tax regime, where certain investment vehicles were exempt from the standard rate.
“This is part of our effort to simplify the tax system and promote fairness in capital markets,” said the DOF.
The change means that income previously exempt from taxation—such as those from long-term deposits—will now be subject to the same 20% final withholding tax as other forms of passive income.