What is the tax treatment of funds related to the PERA?

• With respect to the Contributions: The Contributor shall be given an income tax credit equivalent to 5% of the total PERA contribution, but there could be no refund of the said tax credit arising from the PERA contributions. If the Contributor is an overseas Filipino, he shall be entitled to claim tax credit from any tax payable to the national government under the National Internal Revenue Code.
• With respect to all income earned from the investments and reinvestments of the maximum amount allowed: Tax exempt.
• With respect to Distributions: All distributions upon retirement/death are tax exempt.

What are Distributions upon retirement/death?

• Distributions, whether in lump sum or through pension at the option of the Contributor, may be made upon reaching the age of 55 years, provided that the Contributor has made contributions to the PERA for at least 5 years. The Contributor, however, has the option to continue the PERA.

• Complete distribution shall be made upon the death of the Contributor, irrespective of the age of the Contributor at the time of his death.

What happens in case of abuse of the tax and privileges?

Any person who unduly avails of the tax exemption privileges granted, possibly by co-mingling PERA accounts in an investment with other investments, when such person is not entitled hereto, shall be subject to: (a) penalties (fine and/or imprisonment); and (b) refund to the government double the amount of the tax exemptions and privileges enjoyed, plus interest of 12% per year from the date of enjoyment of the tax exemptions and privileges to the date of actual payment.

What is the penalty on early withdrawal?

“Early withdrawal” pertains to any withdrawal prior to Distributions upon retirement/death. Any early withdrawal shall be subject to a penalty to be determined by the Secretary of Finance and payable to the government. However, no penalty is imposed for:

(a) Payment of accident or illness-related hospitalization in excess of thirty (30) days; and

(b) Payment to a Contributor who has been subsequently rendered permanently totally disabled as defined under the Employees Compensation Law, Social Security Law and Government Service Insurance System Law.

Any premature termination shall be treated as an early withdrawal, except if the entire proceeds are immediately transferred to another PERA investment and/or another Administrator.

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