PERA tax rules 'workable'
THE LATEST DRAFT of Personal Equity and Retirement Account (PERA) tax
rules has been welcomed by the private sector, paving the way for an
official issuance by the Bureau of Internal Revenue (BIR) next month.
Capital Market Development Council members who met last week to review
the still-unnumbered revenue regulation had no opposition to the tax
bureau's proposals, CMDC executive director Rescina S. Bhagwani said.
"The private sector finds the latest draft revenue regulation on PERA
workable, needing only minor clarifications," Ms. Bhagwani said in an
e-mail.
The CMDC proposed "minor edits" to make the language clearer but the
rules have already been "found acceptable," she added.
The BIR posted the draft on its web site last month to solicit feedback
before the Department of Finance (DoF) gives its final approval.
Tax rules are the last thing needed to roll out the PERA law or Republic
Act 9505, which was signed in 2008 to encourage people to save up for
retirement. Implementing rules and regulations were issued in 2009 by
the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.
Tax Commissioner Kim S. Jacinto-Henares said the rules are now pending
DoF approval and could be issued next month.
"The PERA rules will most likely be published in mid-December, to be
effective Jan. 1, 2012," she said in a telephone interview yesterday.
The private sector has long been waiting for the implementation of the
PERA law, described as a crucial tool to deepen the country's capital
markets. Under the retirement plan alternative, a resident Filipino can
contribute a maximum of P100,000 to a PERA account, while overseas
Filipino workers (OFWs) are allowed up to P200,000. A total of five PERA
accounts can be held.
PERA contributions will be exempted from a host of taxes such as the
final withholding tax on interest, capital gains tax on the sale of
bonds and shares, 10% tax on cash and property dividends and regular
income tax.
PERA holders are also entitled to an annual tax credit equivalent to 5%
of all their contributions for the year. Resident Filipinos can charge
this against their income tax liability. OFWs, exempted from paying
income taxes, can use the credit to offset any other national internal
revenue tax liability.
Given the array of tax breaks available, the BIR mandated in the
proposed guidelines that all PERA holders submit proof of income in a
bid to ensure that contributions are taken solely from their earnings.
This requirement is new and beyond the provisions stated in the PERA
law, Philippine Chamber of Commerce and Industry tax committee
chairperson Tammy H. Lipana said in a text message during the weekend.
"This may make it difficult for some people to avail of this retirement
scheme. For example, [for] people who earned or saved funds many years
ago, they may not be able to show proof of earnings anymore. Hence, they
can't invest in PERA products," she said.
Some occupations may also not provide proof of income and a number of
people could find the procedure a hassle, Ms. Lipana added.
Ms. Bhagwani said the provision was a sticking point during the CMDC
review but members accepted it given the need to prevent people from
parking money in PERA accounts to avoid paying taxes.
"Without this rule, people can just put all their money in their PERA
accounts and the accounts of their siblings and friends to make them
exempt from taxes on income and investment income," she said.
"The new rule may be a restriction, but it is not a dealbreaker. I am
optimistic that PERA will be widely taken up by the private sector," Ms.
Bhagwani added.
The PERA law is expected to attract an estimated eight million
Filipinos, especially OFWs and self-employed individuals who are not
required to contribute to the government-run Social Security System and
the Government Service Insurance System.
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