The rate a bank advertises on a savings or time deposit is the gross rate — before tax. Interest you earn on a Philippine deposit is subject to a final withholding tax, which the bank deducts and remits to the BIR automatically. You receive the interest net of tax, and because it's a final tax, you don't declare it again in your annual income tax return.
For ordinary peso deposits — regular savings, time deposits and deposit substitutes — the final withholding tax is 20% of the interest. So a 5% per annum time deposit earns you closer to 4% after tax.
Foreign-currency deposits are taxed differently. Interest from a peso-equivalent foreign-currency (dollar) deposit under the expanded foreign currency deposit system is subject to a 15% final tax for residents (non-residents are generally exempt).
Long-term deposits are the big exception. Interest on a long-term deposit or investment with a maturity of five years or more, issued in line with BSP rules, is tax-exempt — if you hold it to maturity. Pull the money out early and a graduated final tax applies based on how long you held it: less than 3 years is taxed at 20%, 3 to under 4 years at 12%, and 4 to under 5 years at 5%. Hold the full five years and the interest is tax-free.
Here's why this matters when you compare deposits. Take ₱100,000 in a 5% per annum time deposit for one year: gross interest is ₱5,000, the 20% final tax takes ₱1,000, and you keep ₱4,000 — a 4% net yield. A savings account advertised at 4% and a time deposit advertised at 5% are closer than they look once tax is applied, so always compare the after-tax return.
The practical takeaways: the rate you see is pre-tax, peso interest loses 20% to final tax, and a genuine 5-year deposit held to maturity can beat a higher headline rate because its interest is tax-free. Compare current gross rates side by side in the deposits table — then mentally knock off the tax to see your real net yield. For how time deposits stack up against flexible digital savings, see time deposits vs digital savings.
This is general information, not tax advice — rates and rules can change, and specifics depend on your situation. Confirm the current treatment with the BIR or a tax professional before you commit a large amount.