Tuesday, October 21, 2008 Tax notes: Pera establishment
PRESIDENT Arroyo signed into law Republic Act 9505 providing the legal framework for the establishment of the Personal Equity Retirement Account (Pera), which is a voluntary retirement account for employees.
The Pera is open to any individual who has capacity to contract and possesses a taxpayer identification number (TIN). The allowable contribution is limited to P100,000 per year for each individual or spouse, except for overseas Filipino workers, who can invest up to P200,000.
A private employer may contribute to its employee’s Pera to the extent of the amount allowable to the contributor, and such amount shall be allowed as a deduction from the employer’s gross income.
The Pera Law provides tax advantages for retirement savings in the form of non-refundable tax credit at the rate of five percent of the maximum allowable contribution. All income earned from investments and reinvestments, as well as distributions upon retirement, death and qualified early withdrawals are exempt from tax. (Source: Punongbayan & Araullo)
