The Philippines Bureau of Internal Revenue (BIR) enacted new revenue regulations to implement the tax provisions of the Personal Equity and Retirement Account (PERA) Act. The regulations will come into effect on January 1, 2012.
Under the Act, each person, who has the capacity to contract and has a tax identification number, can invest up to PHP100,000 (USD2,3400) in approved PERA funds. The married couples can be benefited from the double allowance of PHP200,000 and the Overseas Filipino workers (OFWs) are allowed to invest up to PHP200,000. An income tax credit of 5% of the annual contributions made will be granted for the investments up to the limits mentioned above. OFWs can claim the credit against any national internal revenue tax liability.
Provided that each specified investment product is approved by the appropriate regulatory authority, income from the investments will be free of tax, in particular, the final withholding tax on interest, and capital gains tax. However, other taxes, such as value-added tax, stock transaction tax and documentary stamp taxes will remain payable.
Employer’s contribution to the PERA of an employee will not form part of the employee’s taxable gross income. The employer will be able to claim it as deduction from his gross income but it will not be allowed to the tax credit if investments in excess of the maximum allowable contribution. Investors will normally be allowed to access their PERA funds when reaching the age of 55.
