Summary
RMO No. 42-2016 prescribes the guidelines and procedures for implementing Republic Act No. 9505, the Personal Equity and Retirement Account (PERA) Act of 2008.
Key points
- Accreditation of PERA Administrators. AITEID accepts Applications for Accreditation (BIR Form No. 1941) only from administrators pre-qualified by a Qualification Certificate from the BSP, SEC or Insurance Commission. Approval brings a Certificate of Accreditation (BIR Form No. 2336), valid until suspended or revoked for violating RA No. 9505 or on the grounds in Section 17 of the Act, as listed in Rule 4.D of its implementing rules.
- Contribution limits. Contributions from employees, employers or self-employed individuals may not exceed Php 100,000.00 per calendar year, or Php 200,000.00 if the contributor is an Overseas Filipino. A Contributor may keep up to five (5) PERAs at a time, each limited to one category of PERA Investment Product.
- 5% tax credit. Employee or self-employed Contributors get a five percent (5%) tax credit on qualified contributions in a calendar year, usable only against Income Tax. An Overseas Filipino with taxable income in the Philippines may claim 5% against any internal revenue tax liabilities except withholding tax as a withholding agent. Without such income, the credit is forfeited in favor of the government. The credit may pay delinquent accounts but is not refundable, convertible into cash or transferable.
- Employer contributions and investment income. A qualified employer contribution gets no tax credit but is deductible from gross income, only up to the amount that completes the maximum allowable contribution. It is exempt from Withholding Tax on compensation and Final Withholding Tax on fringe benefits. Income from PERA investments is exempt from Income Taxes but subject to other applicable taxes such as Percentage Tax, VAT, Stock Transaction Tax and Documentary Stamp Tax.
- Qualified PERA Distributions. Distributions are excluded from gross income and not subject to Income Tax or Estate Tax in these cases: after at least five (5) years of qualified contributions and age fifty-five (55); to heirs or beneficiaries on the Contributor’s death; hospitalization over thirty (30) days with a notarized doctor’s certificate; permanent total disability with a certification from the concerned agency; or immediate transfer to another PERA product or administrator within two (2) working days from withdrawal.
- Filings, reports and penalties. The PERA Administrator files BIR Form No. 2338 within forty five (45) days from the close of the calendar year, and BIR Form No. 1942 within ninety (90) days from the end of the calendar year for qualified Overseas Filipinos and self-employed Contributors. It also submits quarterly and annual reports through AITEID e-mail. Late or missing reports bring the compromise penalties under RMO No. 7-2015, and incorrect information can invalidate accreditation and bring penalty under Sec. 255 of the Tax Code, as amended.
Who is affected
- PERA Administrators
- PERA Contributors: employees, self-employed individuals and Overseas Filipinos
- Employers of PERA Contributors
Deadlines and effectivity
- BIR Form No. 2338: within forty five (45) days from close of the calendar year
- BIR Form No. 1942: within ninety (90) days from end of the calendar year
- Accreditation valid until suspended or revoked
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
Copies of BIR issuances are hosted here for reference. For the official version, check bir.gov.ph. Summaries by Tax Resources PH are not a substitute for the full text or professional advice.