CMEPA and the 20% tax: What it means for your bank savings

Netizens were in an uproar when banks implemented new tax rates on savings interest, prompting many to ask: “What’s going to happen to my savings?”

The changes stem from the Capital Markets Efficiency Promotion Act (CMEPA), a new law signed by President Ferdinand Marcos Jr. in May and enacted in July. It aims to introduce key reforms to level the playing field in trade and investment. One such reform is the reduction of the Stock Transaction Tax (STT) from 0.6% to 0.1%.

However, what triggered the uproar is the uniform 20% tax rate on interest income.

The Department of Finance (DOF) has since clarified misconceptions fueled by social media buzz, especially the mistaken belief that people’s actual bank savings are being taxed 20%.

In reality, it’s not the money in your account being taxed, but the interest it earns while sitting in the bank. The DOF also emphasized that this is not a new tax, but an existing one that has now been standardized under CMEPA.

“1998 pa lang, may 20% tax na ang interest na kinikita ng ating mga karaniwang deposito sa bangko,” the DOF said in a Facebook post. 

(As early as 1998, there was already a 20% tax on our interest being made by ordinary deposits in the bank.) 

The DOF summarized the new tax rates as follows: 

CMEPA and the 20% tax: What it means for your bank savings

The DOF argued that the old system favored those who are richer, as their studies showed that they are the ones holding long-term deposits (TD). 

Rizal Commercial Banking Corp. chief economist Michael Ricafort told Philstar.com that the impact will likely be felt more by those with Foreign Currency Deposit Unit (FCDU) accounts and US dollar time deposits.

“TD amounts become bigger, in terms of the larger interest income generated and now the higher 20% withholding tax that these are subjected to since July 1, 2025,” he said. 

“But for smaller amounts, the changes could be minimal/negligible,” Ricafort said. 

What can the public gain from the CMEPA?

While the CMEPA would certainly make the Philippines more appealing to investors after the lowering of several investment taxes, how could it help the common Filipino who wants to simply earn money? 

The DOF argued that the CMEPA would encourage ordinary Filipinos to invest and diversify their income sources. Other than the reduction of the STT, the CMEPA also decreased the documentary stamp taxes (DST) rate from 1% to 0.75%, as well as removing it completely from the collective investment schemes. 

“These measures are seen to cut transaction costs, encourage market participation and financial planning, boost market liquidity, make the country’s equities market regionally competitive, and increase capital market growth,” the DOF said in a statement. 

Ricafort agreed with the DOF, saying that local investors would have more choices in diversifying their investments with hopes of generating more returns.

While the CMEPA may ease investment, the question of whether or not the average Filipino is willing to invest their money in the current economic environment remains, especially amid inflation and global uncertainties. 

Ricafort said that now is still a conducive time for investing. 

“Bond yields near cycle/multi-year highs that are favorable for investors,” he said. 

What can the public do to mitigate CMEPA’s impact? 

While smaller savings accounts may not feel the effects of the CMEPA, some have raised that middle-class earners who wish to save more money in the long run are more likely to feel the effects of the CMEPA. 

Ricafort advised that they could seek alternative means to save or invest their money. He said that savers could try out a Personal Equity and Retirement Account (PERA). A PERA account is a voluntary retirement savings account that could supplement your SSS. 

Investment is also an option, but Ricafort warned newcomers to be cautious.

“This is investment related, not deposits, that are subject to market conditions or higher risk-higher return trade off as a source of diversification,” Ricafort said. 

Source: Philstar

Real estate prospects clouded by new US tax on remittances

The US decision to impose a 1% remittance tax could serve to dampen property investing activity by overseas Filipino workers (OFWs), industry analysts said.

The remittance tax, a component of the Trump administration’s “One Big Beautiful Bill,” will crowd out any OFW funds earmarked for investing and shift priorities towards essentials, they said.

“While the percentage of remittances being allocated for real estate requirements is increasing, that additional tax will likely affect the inflow of remittances from Filipinos working abroad,” Colliers Philippines Director and Head of Research Joey Roi H. Bondoc said in an interview.

“This might affect the money being set aside for real estate purchases. The lower the remittances, the less will be spent for these discretionary purchases, especially in the luxury segment.”

Remittances could dip between $19.1 million and $148.4 million as a result of the tax, the Department of Finance estimated, describing these movements as having a “minimal” effect on the economy.

OFWs are a key segment of the property market, with many turning to real estate for investment income or to upgrade the living conditions of their families back home.

The decline in money sent home by OFWs would affect demand for the industry’s residential and retail offerings, Santos Knight Frank Associate Director Toby Miranda said.

“OFWs are major demand drivers of residential products, and if they were to send less money, there may be a higher risk of canceled purchases,” he said.

“Remittances from OFWs also impact the purchasing power of their families so retail demand may be impacted,” Mr. Miranda added.

Mr. Bondoc noted that Europe-based OFWs are a strong market for upscale and upper middle-income residential units, while luxury residential units are attractive to Filipinos working in Abu Dhabi.

US President Donald J. Trump on July 4 signed into law the One Big Beautiful Bill, essentially a tax bill that overhauls tax rates and spending. The 1% excise tax on all remittances represents a softening of the bill’s initial proposal to charge remittances by foreign workers 3.5%.

“Given the uncertainties in the global and domestic market, they (OFWs) might have to put these big-ticket purchases on hold, and perhaps wait a little longer before they finally acquire these residential units that they’ve been aspiring for,” Mr. Bondoc said.

Source: Business World

Makati City lowers real property tax rates

Makati City has taken a bold step to provide economic relief and boost investment growth as Mayor Abby Binay signed a landmark ordinance significantly reducing real property tax (RPT) rates in all property classes.

Binay approved City Ordinance No. 2025-047 on March 24, 2025, amending key provisions of the Revised Makati Revenue Code.

The ordinance lowers the RPT rates for residential, commercial, industrial, and special properties, marking one of the most progressive tax reforms in the city's history.

Under the new ordinance, residential properties will now be taxed at 1.0 percent, down from 1.5 percent; tax for commercial properties will be reduced from 2.0 percent to 1.5 percent, while industrial properties will remain at 1.5 percent. Special properties get the most significant cut, dropping from 1.5 percent to 0.5 percent. Moreover, the additional tax rate for residential and commercial properties has been halved from 0.25 percent to 0.125 percent, making property ownership and business operations more affordable.

The ordinance also slashes assessment levels, the basis for computing assessed property values. Residential property assessment levels have seen significant reductions. R-1 properties have been adjusted from 12 percent to 0.65 percent, R-2 properties from 12 percent to 0.30 percent, and R-3 properties from 12 percent to 0.25 percent.

For commercial and industrial properties, assessment levels have also been reduced from 40 percent to more competitive rates. Commercial classifications C-1, C-2, and C-3 now range between 2.0 percent and 0.60 percent, while industrial classifications I-1, I-2, and I-3 follow the same range. Special class properties remain at 0.70 percent in commercial and industrial zones and 0.30 percent in residential areas.

The mayor assured stakeholders that despite the anticipated short-term revenue dip, Makati's financial health remains robust.

The city's budgetary flexibility has been bolstered by an estimated P7.9 billion annual savings following the transfer of 10 Embo villages to Taguig, which previously required significant subsidies. She emphasized that the long-term benefits far outweigh the expected short-term revenue adjustments. This move reinforces Makati's commitment to a fair, efficient, and transparent tax system that benefits both businesses and residents.

To further incentivize compliance, the ordinance allows property owners who have already paid their RPT for 2025 to receive a tax credit equivalent to any excess payments, which can be applied to future tax dues.

Binay said Makati's latest tax reform is more than just a fiscal policy shift. It is a strategic move to attract more investments, encourage property development, and sustain economic momentum.

She said that by prioritizing equitable taxation and financial prudence, the city cements its reputation as a premier business hub and a model for smart governance.

Source: Manila Times