PERA Tax Rules Ready

by: Diane Claire J. Jiao

source: Business World

TAX RULES needed to implement the much-awaited Personal Equity and Retirement Account (PERA) scheme have been submitted to the Finance department and are pending approval.
The proposed revenue regulations, among others, set stringent guidelines for tax credit certificates (TCCs) that will be granted to overseas Filipino workers (OFWs) to ensure that these are not used fraudulently.
“We submitted the PERA Revenue Regulations [last week] to the DoF (Department of Finance,” Bureau of Internal Revenue Commissioner Kim S. Jacinto-Henares said on Friday.
Finance officials were not immediately available for comment as to when, or if, the BIR’s tax rules would be issued.
The PERA Act or Republic Act 9505 was signed into law in 2008 and its implementing rules were issued the following year by the Securities and Exchange Commission and the Bangko Sentral ng Pilipinas.
The law, however, has not been implemented up to now given the absence of BIR tax rules.
A stumbling block was the issuance of tax credits to OFWs that could be difficult to monitor for the bureau, Ms. Henares explained.
“We were focused on making safeguards regarding the use of TCCs,” she said.
One of these is the printing of the tax credits on a special security paper so that the documents cannot be copied and counterfeited, Ms. Henares said.
Migrant Filipinos will also have to apply for a tax debit memo when they use their TCCs, stating how much of the tax credits will be claimed and for what tax obligation.
The BIR will also establish internal records of TCC recipients, Ms. Henares said.
“This will ensure that only those who are qualified for the TCCs will get to enjoy it,” she noted.
This was also suggested by Tammy H. Lipana, chairperson of the Philippine Chamber of Commerce and Industry’s tax committee.
“There should be a registry of the TCCs issued, whether directly to OFWs or coursed through the embassies to OFWs,” Ms. Lipana said in a telephone interview on Friday.
“The tax debit memos also ensure that the BIR still gets to approve how the TCCs can be used,” she added.

INVESTMENT ALTERNATIVE
The PERA Act provides Filipinos with an alternative means of planning their retirement, allowing the establishment of accounts where they can contribute a maximum of P100,000 per year. Those working abroad have been provided a higher annual cap of P200,000. Five PERAs can be maintained at any one time but the annual contributions must not exceed the set limits.
PERA investment and reinvestment income will be exempted from a slew of taxes such as the 20% final withholding tax on bank deposits, 10% tax on cash or property dividends and the stock transaction tax on shares traded through the stock exchange.
A tax credit equivalent to 5% of all PERA contributions will also be granted to account holders. OFWs will receive TCCs which they can use to pay their internal revenue taxes. Resident Filipinos, meanwhile, will just get a BIR certification that will be used by employers to adjust taxes on their income.
The PERA Act is expected to attract an estimated eight million Filipinos, especially OFWs and self-employed individuals who are not required to contribute to the Social Security System and theGovernment Service Insurance System.
“The implementation of the PERA act is very much anticipated. Right now, when you save up for your retirement, there are no tax benefits with it,” Ms. Lipana said.
A possible sticking point, though, is that OFWs may not have any use for their TCCs since they are exempted from income taxes under the law, she pointed out.
The BIR’s Ms. Henares, however, said OFWs could have other tax liabilities.
“If they have real estate [assets and they sell this], that is subject to capital gains tax. If they have sidelines and other businesses here in the Philippines, that is subject to income tax,” she responded.
“Also, if the OFWs return to the Philippines to work here, they will have to pay income tax already. They will be able to use their TCCs then,” Ms. Henares added.