RMC No. 4-2023: Clarifies the base amount for the imposition of the 20% penalty relative to the early withdrawal of Personal Equity and Retirement Account (PERA) for assets, accounts and sub-accounts classified as unqualified

Summary

RMC No. 4-2023 clarifies the base amount for the 20% penalty on early withdrawal of a Personal Equity and Retirement Account (PERA) for assets, accounts and sub-accounts classified as unqualified.

Key points

1. Penalty components. Under Section 10(C) of RR No. 17-2011, the early withdrawal penalty is 20% of the gross income earned by the PERA for the entire duration, plus the 5% tax credit availed. It applies to any early withdrawal outside the circumstances in Section 10(B).
2. Losses. Any loss incurred on PERA sub-accounts is not deducted from the gross income earned.
3. Termination of sub-accounts. In an unqualified early withdrawal, withdrawing one sub-account automatically terminates all other sub-accounts.
4. PERA Administrator. The Administrator administers and maintains the accounts, and computes and withholds the penalty from the proceeds due to the contributor. Reporting and remittance to the BIR follow RR No. 2-2022 and RMC No. 45-2022.

Who is affected

• PERA contributors making unqualified early withdrawals
• PERA Administrators

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.