The PERA Law or (Personal Equity and Retirement account) is a personal and voluntary retirement account that motivates the regular employee’s and self-employed individual to invest part of their salary or earnings for their future retirement.
Believe it or not but not a lot of people know about this law, even though it was established 2008 under the Republic Act 9505. It is a pension investment vehicle with tax perks/breaks hence it was not widely publicized.
What are these Tax perks/Breaks?
It gives you a 5% income tax credit. For example: if you invested Php 100,000.00 on your PERA ACCOUNT, you will get Php 5,000.00 income tax credit. So if you need to pay Php50,000.00 for you annual income tax, you only have to pay Php 45,000.00 (Php 50,000 – Php 5000 tax credit = Php 45,000)
It is exempted from 20% withholding tax.
It is exempted from 10% Dividend Tax
It is exempted from Capital Gain.
With all these break the Government, it was estimated that the government will lose about 12 billion pesos on tax perks per year.
"We believe that the long-term benefits of the PERA would outweigh the revenue loss," said Benedict Tugonon, president of tax industry group Tax Management Association of the Philippines.
What are the 4 parties that participate in the PERA LAW?
Contributor: you can invests a maximum amount of Php100,000.00 per year for local employee or Php200,000.00 per year for overseas Filipino workers.
Administrator: it is either a bank (BPI and BDO) or institution that oversees the account. They have to be pre-qualified by the BSP, Insurance commission, Security exchange commission, and accredited by the Bureau of internal revenue.
Investment Manager: they will manage your investments or advise you on what is the best investment for you. They have to be accredited by the BSP, Insurance commission, and Security exchange commission.
Custodian: is a separate and distinct entity unrelated to the Administrator, accredited by the BSP to take custody of PERA assets.( eg. Deutsche Bank AG, Manila Branch for BDO)
When can you redeem income gained from PERA investment?
You can redeem it when you reach the age of 55 y/o for at least 5 years of investing. Early redemption will incur penalties.
Are there exemptions from penalties for early redemption?
Yes, if the following conditions have been observed:
1. Immediate transfer of proceeds to another Qualified/Eligible PERA investment Product and/or another Administrator within 2 working days from the withdrawal
2. For payment of accident or illness-related hospitalization in excess of thirty (30) days – needs a duly notarized doctor’s certificate
3. For payment to a Contributor who has been subsequently rendered permanently totally disabled as defined under the Employees Compensation Law or Social Security System Law – needs certification from pertinent government agency.
What do you need to invest? You have to go an administrator (BDO or BPI for now), bring your tax identification number, fill up a form and choose your investment. It’s that easy.