20% tax on interest

There’s been a lot of talk about this topic lately, to the point of misinformation.

- WILMA I. MIRANDA

In this article, I want to present both sides—the government’s perspective and some statements from the public—to help us understand it better.

First off, the public shouldn’t panic about this 20-percent tax on interest since it’s actually been in place for short-term deposits since 1998, passed under the National Internal Revenue Code (NIRC) of 1997. And crucially, the 20-percent tax isn’t on the deposit amount itself but on the interest earned from long-term placements, which are those with a term of five years or more. Before this new law, long-term placements were tax-exempt, but those for less than five years were already taxed at a 20-percent rate on their interest.