DOF Clarifies: CMEPA Is Not a New Tax, But a Move Toward Fairness

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The Department of Finance (DOF) clarified that the Capital Markets Efficiency Promotion Act (CMEPA) does not introduce a new tax. Instead, it addresses inequality in the tax system by standardizing interest income taxation.

Key details

As per the Department of Finance:

Before CMEPA, the DOF said, bank deposits maturing in less than three years were already taxed at 20%. However, deposits with longer maturity periods received lower or no tax, favoring wealthier individuals.

Deposits maturing in over five years were tax-exempt
Deposits maturing in 4 to 5 years had a 5% tax
Deposits maturing in 3 to 4 years had a 12% tax

The Finance department said this preferential system disadvantaged depositors with liquidity needs, who were unable to lock in long-term savings. CMEPA removes these disparities by applying a flat 20% rate to all deposit maturities.

Key exclusions

Long-term deposits made before July 1, 2025, retain their tax advantages
SSS, GSIS, and Pag-IBIG savings programs remain tax-exempt

CMEPA also includes provisions designed to increase market participation by reducing investment-related taxes.

Stock transaction tax reduced from 0.6% to 0.1%
Documentary stamp tax on original issuance of shares lowered from 1% to 0.75%
DST on collective investment schemes removed

To ensure fairness, CMEPA standardizes taxation for financial instruments issued abroad and eliminates tax exemptions for government-owned and controlled corporations (GOCCs).