19 Personal Equity Retirement Account PERA PDF

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PART 19

Personal Equity Retirement Account (PERA)

Under RA 9505, otherwise known as the "Personal Equity Retirement Account (PERA) Act of 2008", all income earned from the investment and reinvestment of PERA assets in PERA investment products shall be exempt from income taxes provided the said PERA investment products have been duly accredited by the concerned regulatory agency**. Moreover, income from investments and reinvestments of PERA assets in government securities is likewise exempt from income taxes, Under the law, individuals are allowed to set up their own PERA which shall enjoy certain tax incentives. Employees, including self-employed individuals and Overseas Filipinos, can start planning their future by establishing their own PERA. REGULATORY AGENCIES Bangko Sentral ng Pilipinas (BSP) -as regards banks, trust entities, and other BSP supervised financial institutions. Securities and Exchange Commission (SEC) – for investment companies, investment houses, stock brokerages. Office of the insurance Commission (OIC) – for insurance companies and pre-need companies DEFINITION OF TERMS (RR 17-2011) PERA - shall refer to a Contributor's voluntary retirement account established from the qualified PERA Contributions and/or Qualified Employer Contributions, for the purpose of being invested solely in Qualified/Eligible PERA Investment Products. Qualified Employer's Contribution-Shall refer to the contribution made by the employer (whether as a single proprietor, a partnership or a corporation) from the private sector to the PERA established by his/its employee which, together with such employee's contribution, if any, shall not exceed such employee's Qualified PERA Contribution Qualified PERA Contributions - shall refer to the contributions of the Contributor to his PERA, which shall not exceed P100,000 per calendar year (if the Contributor is non-overseas Filipino), or P200,000 per calendar year (if the Contributor is an Overseas Filipino or in representation of an Overseas Filipino)

Administrator - shall refer to an entity which had been pre-qualified by the concerned Regulatory Agency and accredited by the BIR, responsible for administering and overseeing the PERA of the Contributor .

TAX TREATMENT OF PERA (income, PERA Ditribution, Employer’s contributions) PERA Income Investment income of the Contributor consisting of all income earned from the investments and re-investments of his PERA Assets in the maximum amount allowed herein shall be exempt from the following taxes as may be applicable; 1. The final withholding tax on interest from any currency bank deposit, yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, including depository bank under the expanded foreign currency deposit system. 2. The tax on capital gains from sale, exchange, retirement or maturity of bonds, debentures, or other certificate of indebtedness. 3. The 10% tax on cash and/or property dividends, actually/constructively received from a domestic corporation, including a mutual fund company. 4. The capital gains tax on sale, barter or exchange or other disposition of shares of stock in a domestic corporation, 5. Regular income tax Provided, that each specific investment products must be approved by the concerned regulatory agency before its income or distribution can be granted tax incentives and privileges. Provided, further, that non-income taxes, if applicable, relating to the above investment income of the PERA account of a Contributor, shall remain imposable, including Percentage Taxes (Sections 116-127 of the Tax Code), value added tax and documentary stamp tax. PERA Distributions Qualified PERA distributions received by the Contributor, or in case of the death of the Contributor, by his heirs or beneficiaries, whether in a lump-sum or pension for a definite period or lifetime pension, shall be excluded from the gross income of the Contributor and shall not be subject to income tax. The same shall be excluded from the gross income in the hands of his heirs or beneficiaries, as the case may be, and shall not be subject to estate tax.

Qualified Employer's Contribution to the Employee's PERA The qualified employer's contribution to his/its employee's PERA shall be in addition to, and not in lieu of, the employer's contribution to SSS and its obligation to pay retirement benefit to his/its employees under the Labor Code. The total of the employer's and employee's contribution to his PERA and all the benefits, including tax incentives and privileges arising therefrom, shall all belong to the employee and shall not, in anyway, inure to the benefit of the employer. The employer shall not be entitled to any 5% credit from its contribution to an employee's PERA. The qualified employer's contribution to his/its employee's PERA shall not form part of employee's taxable gross income, hence, exempted from the withholding tax on income, whether withholding tax on compensation or fringe benefits. On the other hand, the employer can claim the actual amount of his/its qualified employer's contribution as a deduction from his/its gross income, but only to the extent of the employer's contribution that would complete the maximum allowable PERA contribution of an employee. Tax Credit A qualified contributor shall be entitled to a tax credit in the amount 5% of the aggregate Qualified PERA Contributions made in one calendar year. An employee qualified contributor shall be issued shall be issued a Certificate of Entitlement to 5% tax credit while a self-employed shall be issued a PERA TCC by the BIR. The entitlement to 5% tax credit for an employee or one who is selfemployed shall be allowed to be credited only against the Contributor's income tax liability. However, if the Contributor is an overseas Filipino, he shall be entitled to claim the 5% tax credit against any national internal revenue tax liabilities (excluding the withholding tax liabilities as withholding agent). Provided, that in no instance can there be any refund of the said tax credit arising from the PERA contributions. The tax credit arising from PERA Contributions shall not be refundable or transferable. GUIDELINES The BIR'S PERA Processing Office (i.e., the Audit Information, Tax Exemption and Incentives Division (AITEID) under the Assessment Service) shall accept only Applications for Accreditation (BIR Form No. 1941) (Annex "A") filed by pre-qualified PERA Administrator based on "Qualification Certificate" issued by the concerned Regulatory Authority/Agency (i.e., Bangko Sentral ng Pilipinas (BSP) or the Securities and Exchange Commission (SEC) or the Insurance Commission (IC); Upon approval of the Application for Accreditation, the AITEID shall issue Certificate of Accreditation (BIR Form No. 2336) (Annex "A-1") to the PERA Administrator, a copy of which shall be transmitted to the concerned Revenue District Offices (RDOs)/Offices under the Large Taxpayers Service (LTS) having jurisdiction over the PERA Administrator, for proper monitoring and to ensure

that the PERA Administrator maintains a separate set of books of accounts to record all PERA contributions and related transactions (e.g., income earned by the PERA Assets, withdrawals, and/or terminations thereof); The accreditation of a PERA Administrator shall be valid from the date of issuance of the Certificate of Accreditation until it is suspended or revoked for violation of any of the provisions of Republic Act (RA) 9505, or for any of the grounds stated under Section 17 thereof, as enumerated under Rule 4.D of the Rules and Regulations Implementing the PERA Act of 2008; The PERA Administrator shall be designated by the Contributor to handle the administration of PERA established by the employee which, together with the contribution made by the employer, if any, shall not exceed the employee's qualified PERA contribution, The PERA Administrator shall ensure that contributions (.e., employees and/or employer, self-employed, Overseas Filipinos, or in representation of such Overseas Filipinos) are under its exclusive administration through an on line validation with the PERA Contributor's database to be established by the BSP as provided under Rule 4.A.4 of the Rules and Regulations Implementing the PERA Act of 2008; Contributions to PERA can come from employees and/or their employers or self-employed individuals which shall not exceed Php100,000.00 per calendar year, or Php200,000.00 per calendar year if the contributor is an Overseas Filipino as defined in Rule 7 of the Rules and Regulations Implementing the PERA Act of 2008; A Contributor may create and maintain a maximum of five (5) PERAS at any one time. However, each PERA shall be confined to only one category of PERA Investment Product. Thus, a Contributor can have five (5) PERAs and five (5) categories of PERA Investment Products; An employee or self-employed qualified Contributor shall be entitled to a five percent (5%) tax credit of the aggregate qualified PERA contributions made in a calendar year which shall be allowed to be credited only against their income tax liabilities. An Overseas Filipino Contributor with taxable income in the Philippines shall be entitled to a five percent (5%) tax credit to be claimed against any internal revenue tax liabilities, excluding his/her withholding tax liabilities as a withholding agent. However, Overseas Filipino Contributor without taxable income in the Philippines shall also be entitled to a five percent (5%) tax credit but will eventually be forfeited in favor of the government....