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Finally, PERA law up for implementation

By Prinz Magtulis (philstar.com) | Updated July 22, 2016 - 6:22pm

 The PERA Law was passed in 2008.File photo

MANILA, Philippines -- Employees may soon see additional deductions on their monthly salaries to be put for retirement after the Bureau of Internal Revenue finally gave the long-delayed go-ahead to a savings program passed in 2008.

The go-signal was issued through Revenue Memorandum Order 42-2016 that laid out reportorial requirements for Republic Act 9505 or the Personal Equity and Retirement Account (PERA) Law.

"With the engines all set out for the proper implementation... many employers are expected to take this opportunity to become an agent...to promote capital market development and savings mobilization," the order stated.

"Employees, including self-employed individuals and overseas Filipinos, can start planning their future by establishing their own PERA," it added.

PERA establishes a retirement system where contributions are made by both employers and employees.

These contributions are managed and invested by an "administrator" chosen by the employee. Any person may only have a maximum of five PERA accounts cumulatively worth up to P200,000.

Contributors are entitled to income tax credit every year worth five percent of his or her annual contributions.

PERA will come on top of existing contributions to pension funds Social Security System and Government Service Insurance System.

The Employers Confederation of the Philippines declined to comment on possible additional costs to employers.

The measure is also considered revenue eroding, with original government estimates of P12 billion lost 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.

Under the order, PERA administrator will need to apply before the BIR's Audit, Information, Tax Exemption and Incentives Division, where they will also submit quarterly and annual reports.

Reports will contain PERA transactions, including contributions, income earned, assets where it is invested, early withdrawals and terminations by contributors.

They are also tasked to maintain a "record" of all these information. BIR and the Bangko Sentral ng Pilipinas (BSP), meanwhile, will establish network connectivity for monitoring.

"Even with this order, PERA could not be implemented without administrators applying before BSP," former BIR commissioner Kim Henares said by phone.

BSP deputy governor Nestor Espenilla Jr. said the central bank has approved two administrators so far.

Finance Secretary Carlos Dominguez III had made it his priority to implement PERA during the first six months of the Duterte administration.

Henares said she did not intentionally delay PERA's issuance because it will decrease revenues.

"I was supposed to sign it after April 15 to avoid confusion in income tax payments. That was the same draft signed now," she said.
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KNOWING YOUR BIR REGULATIONS AND ISSUANCES

Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

Revenue Bulletins (RB) refer to periodic issuances, notices and official announcements of the Commissioner of Internal Revenue that consolidate the Bureau of Internal Revenue's position on certain specific issues of law or administration in relation to the provisions of the Tax Code, relevant tax laws and other issuances for the guidance of the public.

BIR Rulings are official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.
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