Guidelines in establishing PERA

(Revenue Memorandum Order No. 42-2016)

This Tax Alert is issued to inform all concerned on the guidelines and procedures in establishing Personal Equity and Retirement Account (PERA).

Accreditation of PERA Administrators

1. The Audit Information, Tax Exemption and Incentives Division (AITEID) shall be the BIR’s PERA processing office. Applications for accreditation (BIR Form 1941) shall be accepted only PERA administrators who were issued a “Qualification Certificate” issued by the concerned Regulatory Authority (BSP, SEC or IC).

2. Certificate of Accreditation (BIR Form 2336) shall be issued to the PERA Administrator, and a copy to the RDO/LTS having jurisdiction over the PERA administrator, for monitoring and to ensure maintenance of a separate books of accounts for PERA contributions and related transactions.

3. Accreditation shall be valid until suspended or revoked for violations or non-compliance.

PERA Incentives

1. The PERA law allows employees and/or their employers or self-employed individuals to contribute to the PERA account up to Php 100,000 per calendar year, or Php 200,00 for an overseas Filipino contributor and enjoy the following incentives:

a. 5% of the aggregate PERA contributions in a calendar year as income tax credit to employee or self-employed contributor.

b. 5% tax credit against internal revenue tax liabilities, excluding withholding tax liabilities, to an overseas Filipino contributor. Overseas Filipino contributor without income within the Philippines shall also be entitled to a 5% tax credit but will eventually be forfeited in favor of the government.
The tax credits can be used as payment for delinquent accounts, but cannot be refunded, converted into cash or transferred.

c. Employer’s contribution to employee’s PERA shall likewise be exempt from withholding tax on compensation and fringe benefits tax. This is a tax deductible expense to the extent that would complete the allowable PERA contributions.

d. All income earned from investments and re-investment of PERA assets are not included in the maximum allowable PERA contribution, and shall be exempted from income taxes, but subject to other applicable taxes.

e. Qualified PERA distributions (QPD) are not taxable on the contributor, nor in the hands of the heirs or beneficiaries. However, for non-qualified distributions, taxes from all income earned, utilized tax credits and corresponding penalties shall be computed and deducted from the net proceeds.

Maximum of five PERAs with one category of investment product may be created and maintained at any one time by one contributor. Investment decisions pertaining to PERA is vested on the owner of the account.

Issuance of Tax Credit Certificates

Concerned RDOs shall issue the following:

a. Certification of entitlement to 5% tax credit for employee-contributor (BIR Form No. 2339) for release to the PERA administrator who will in turn transmit such certificate to the employer for automatic adjustment of withholding tax on employee’s compensation; or

b. PERA tax credit certificate (TCC) to the qualified overseas Filipino or self-employed contributor for release to the PERA administrator who will in turn transmit to the PERA contributor. (BIR Form 2337)
Reports and Monitoring

1. PERA administrator shall file with the concerned RDOs the following:

a. Certification of Aggregate amount of Qualified PERA Contribution (BIR Form No. 2338) within 45 days from the close of the calendar year; and

b. Application for PERA-TCC (BIR Form No. 1942) within 90 days from the end of the calendar year for self-employed contributors.

2. PERA administrator shall submit quarterly and annual reports of PERA transactions made by the contributors.

3. Concerned RDOs may recommend the suspensions or revocation of accreditation of PERA administrator.

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