RMC No. 91-2026 — Clarification of the Base Amount for the Imposition of the Twenty Percent (20%) Penalty Relative to the Early Withdrawal of Personal Equity and Retirement Account (PERA) Assets, Accounts and Sub-Accounts Classified as Unqualified, and Amending Certain Provisions of Revenue Memorandum Circular (RMC) No. 4-2023

REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BT]REAU OF INTERNAL REVENUE BACOI,IC Bringing In Revenues P'L'P'XAS for Nation-Building JUL 21 2m6 REVENUEMEMoRANDUMcTRcULARNo.{4jl - 2 0 2 6 SUBJECT: Clarification of the Base Amount for the Imposition of the Twenty Percent (20%o) Penalty Relative to the Early Withdrawal of Personal Equity and Retirement Account (PERA) Assets, Accounts and Sub-Accounts Classified as Unqualified, and Amending Certain Provisions of Revenue Memorandum Circular (RMC) No. 4-2023 TO All Intemal Revenue Officials, Employees, PERA Administrators/ Custodians, Contri butors and Others Concemed I. OBJECTIVE This Circular is issued to: a Clarifu, by way of illustrations, the proper dstermination ofthe base amount for the imposition of the twenty percent (20%o) Early Withdrawal Penalty (EWP) under the PERA Law; a Affirm and reiterate the applicable treatment of qualified and unqualified early withdrawals of PERA assets; a Provide guidance on partial withdrawals, including the sale and redemption ofPERA products; and a Clarifr the penalty treatment of income from PERA assets not covered by PERA exemptions, specifically exchange-traded shares and dividend income. II. DEFINITION OFTERMS For purposes of clarity and uniform interpretation ofthe provisions ofthis Circular, the following terms shall be defined as follows: 00000529r PERA Assets - refer to the aggregate assets held in the PERA at any given time, which :s ffi,tl zttD include cash funds and PERA investment products in which such funds are invested or re-invested, together with all'income eamed therefrom. e :> Pursuant to Revenue Regulations (RR) No. 17-2011, as amended, a PERA ci, 2O z in Administrator may offer PERA investment products under the five (5) product c= lr .tt categories, subject to the approval of the concerned Regulatory Authority. z -{ e, 13 IEE E} 2 Qualified/ Eligible PERA Investment Products refer to the investment products c - tS (a< duly approved by the concemed Regulatory Authority which could be any of the -,= following: zh BIR National Office Bldg., Senator Miriam Defensor-Santiago Avenue, Diliman, Quezon City W ebsile: www. b i r. g ov. p h Trunkline: 8981-7000 i 8929-7676

@ BLI REA UO FI NTE RFCOR 0s MA NAC F R NAI. R EVENU E MENI Dtvtsto N Ir_ AUA 1120?6 a) Unit Investment Trust Fund (UITF); ffi AO MIN UI{IT. 1 b) share of stock of a mutual fund; 'Bfl ilii tl:2ttt c) annuity contract; d) insurance pension product; 00000529 e) pre-need pension plan; 0 shares of stock or other securities listed and traded on the local stock exchange; c) exchange-traded bonds; h) govemment securities; and i) any other category of investment product or outlet which the concerned Regulatory Authority may allow for PERA purposes: Provided, that product must be non- speculative, readily marketable, and with a track record ofregular income payments to investors. 3 . Account - refers to the main account corresponding to one product category of PERA investment products, as enumerated above. 4. Sub-Account - refers to the specific PERA investrnent from a different issuer under the same PERA investment product category. 5. Qualified Early Withdrawal - refers to a withdrawal of PERA assets, whether in full or in part, which is not subject to the EWP, where the withdrawal is made for any of the following reasons: a) For the payment ofaccident or illness-related hospitalization in excess ofthirty (30) days; b) Permanent or total disability ofthe contributor; or c) Transfer of PERA Assets to another qualified PERA investrnent product and/or to another PERA Administrator within fifteen (15) calendar days from withdrawal thereof. Deduction of fees of the administrator, custodian and product provider. from PERA assets after the account has been opened shall not be considered as early withdrawal, provided that such deduction is made with the consent ofthe Contributor. 6. Gross Income Earned - refers exclusively to the income component embedded in the PERA assets that are actually redeemed, sold, or otherwise withdrawn, whether in whole or in part, from the main account or any sub-account. It shall not include unrealized income, gains, or appreciation on assets that remain invested in the PERA. 7. Unqualifred Early Withdrawal - refers to a withdrawal of PERA assets, whether in full or in part, from the main account or any sub-account, and effected either through the cash custodian under a third-party custody arrangement or directly by the contributor self-custody arrangement, where the purpose or circumstance for such withdrawal does not fall under any of the instances recognized as qualihed early Clotificotion of the Bose Afiount lot the lmposifion ol the 2M Penolty Relotive to the Eo y Withdtowol oJ PERA AsseB, AccounB ond Sub- occounts Clossifred os Unquolifred, ond Arnending Certoin Prcvisions oJ RMC No. 4-2023 ' PaEe2ofT

withdrawals under Section II (5) of this Circular. Any unqualified early withdrawal shall be subject to the EWP. For purposes ofthis Circular, proceeds from the sale ofPERA investment products that are transferred to and retained in the contributor's PERA custody account, whether under a third-party or self-custody arrangement, shall not be considered an early withdrawal. A qualified or unqualified early withdrawal from a specific $ub-account shall not, by itself, result in the closure, termination, or impairment ofany other sub-account, nor shall it be construed as a withdrawal from, or termination of, the entire PERA investment product category. trI. IMPOSITION OF EARLY WITHDRAWAL PENAI]TY Pursuant to Section 10(C) of RR No. 17-2011, as amended, an EWP shall be imposed on any unqualified early withdrawal of PERA assets. The EWP shall consist of the following: Twenty percent (20%:) of the Gross Income Earned attributable to thd PERA assets or portion of PERA assets withdrawn, calculated from the date of opening or creation of the relevant PERA account or sub-account up to the date of withdrawal; and 2 The recovery of any five percerit (5%) tax credit previously availed of with respect to such withdrauln PERA assets for the entire period. Only the Gross Income Eamed attributable to PERA assets that are actually withdrawn shall be included in the EWP base. Any Gross Income Eamed that' remains invested, reinvested, or otherwise retained within the PERA-including unrealized gains and proceeds from the sale, redemption, or liquidation of PERA investment products that continue to be held under PERA custody be excluded from the EWP base, as such amounts have not been subject to an early -shall withdrawal. Accordingly, the EWP shall apply only to the Gross Income Earned attributable to the portion of PERA assets actually withdrawn and shall not affect other PERA accounts, sub.-accounts, or invsstment product categories that remain intact. Any losses incurred in other PERA accounts or sub-accounts shall not be deductible from the Gross Income Earned attributable to the withdrawn PERA assets. For guidance and reference, the following illustration is hereby provided: (jr" i BI]REAU OF INTERNAT REVENUE RFCCROS M aiiAriEMrlvT DIVISION B- ffi AUG 11 2020 IH ADMIN UNIT . 1 tlfrn BY: 0_ UU UUO 52 TIME: I Clotificotion d the Bdse Anount lot the lmposition d the 20% Penolty Relotive to the Eorly-Withdtowol ol PERA Asseb, Accounts ond Sub- occounts Clossilied os Unquolified, ond Amending cetToin Provisions oJ RMC No. 4: 2023

00000529 €r 6A \), Product Sub-Account Invested Capital Unrealized >.l s Category Gain* <; zs .E' UITF ABC MM UITF ? 20,000.00 5,000.00 ? GI GI =i DEH Bond UITF 50,000.00 10,000.00 F: )T GHI Equity UITF 30,000.00 3,000.00 =z il! r.r_9 g. o2 r F{ Fl z! UITF Sub.Total 100,000.00 ? 18,000.00 ? CD E,i al = <i] Stocks Meralco 40,000.00 P 10,000.00 P =9 GY LDT 30,000.00 10,000.00 dl(r ri\ Fh,# Stocks Sub-Total 70,000.00 ? 20,000.00 ? ui' E----g-- Cash/ Bank (PERA custodian) 30,000.00 ? Total PERA Assets 200,000.00 ? 38,000.00 *Unrealized Gain becomes realized only upon sale/redemption of the relevant " sub-account. EWP, if applicable, is computed only on realized gain that is actually withdrawn. Based on the above, the following scenarios are presented to guide the application of EWP rules: Scenario A --One sub-account is sold and proceeds withdrawn Action: Sold ABC MM UITF for P25,000.00 (capital P20,000.00; realized gain Ps,000.00). The Contributor withdraws the proceeds, where the reasons for the withdrawal are not among those cited as qualified under Section II (5) of this Circular. The realized gain of P5.000.00 is subject to EwP. EWP Computation: Realized gain actually withdrawn x 20% P5,000.00 x 20% = PI,000.00, which represents the applicable EWP on the redeemed and withdrawn proceeds. Rule: This does not terminate the entire UITF product catogory. EWP applies only to realized gain from the sale of ABC MM UITF. Scenario B The Asset from one Sub-Account is Sold, but the Sale Proceeds are - Retained in the PERAAssets Action: Meralco stocks were sold for P50,000.00 (capital P40,000.00; realized gain of Pl0,000.00). The proceeds are retained in the PERA assets for reinvestment. Rule: There is no unqualified early withdrawal in this case, as the funds remain within the PERA account for reinvestrnent. Hence, the realized gain is not subject to the EWP. Scenario B.l Withdrawal of Reinvested Proceeds - Unqualified Early Subsequent Action: The entire P50,000.00 proceeds from the sale of the Meralco stocks are reinvested into another PERA-approved investment product. Over time, this reinvestment grows to ?58,000.00, generating an additional gain of P8,000.00. The contributor subsequently executes an unqualified early withdrawal of the entire investment' Ctorilhotion ol the Bose Amount lot the lmposition ol the 20% Penov Retotive to the Eo y Withddwol of PERA Asseg Accounts ond Sub- occounts Clossified os l)nquolified, ond Amending Certoin ?rouisbns ol RMc No. +2023 PaEe 4 of 7

Rule: The EWP is computed based on the cgmulative gross income eamed by the PERA assets from the time of account creation up to the time of withdrawal. This includes both the P10,000.00 realized gain from the sale of the Meralco stocks and the P8,000.00 gain derived from the reinvestrnent (Scenario B). /-.J-l EUREAU OF INTERNAL REVENUE {.PJ RECORDS MANAGEMENT DIVISION EWP Computation: Realized gain applicable: P8,000.00 +F1 0,000.00: Pl 8,000.00 AUo 1 12020 EWP: ADMIN UNIT.1 Fl8,000.00 x 20yo: P3,600.00 BY: 00 00 Accordingly, the applicable EWP on the curnulative income eamed by the PERA assets is P3,600.00. Scenario C Partial Withdrawal from a UITF Sub-Account - Action: Contributor withdrew Pl5,000.00 (50% of capital P30,000.00) from GHI Equity UITF, currently valued at F33,000.00 (capital ?30,000.00; unrealized gain P3,000.00). EWP Computation: Realized gain applicable: 50%o x P3,000.00= P 1,500.00 EWP: Pl,500.00 x 20o/o: P300.00, which represents the applicable EWP on the redeemed and withdrawn proceeds. Rule: The EWP shall apply only to the reatzed income corresponding to the portion of the assets in a sub-account actually redeemed and withdrawn, pursuant to Section Itr of this Circular. This Circular shall be applied consistently with applicable rules and regulations issued by the relevant regulatory agency, insofar as these govem the valuation, redemption, and transfer of PERA investment products. TV. CLARIFICATION ON GRANTS OF PERATAX EXEMPTIONS Under Republic Act No. 9505 and its Implementing Rules and Regulations, tax exemptions under the PERA apply strictly to PERA assets and income that remain within the PERA. Such exemptions are limited to the following: 1. The final wittrholding tax on interest from any ourrency bank deposit, yield or any other monetary benefit from deposit substitutes and from fust funds and similar arrangements, including a depository bank under the expanded foreign currency deposit system; 2. The capital gains tax on the sale, exchange, retirement or maturity of bonds, debentures or other certificates of indebtedness; Clarification of the Bose Amount for the lmposition oI the 20% Pendlty Relotive to the Eorly Withdrawol ol PERA Assets, Accounts and Sub- occounts Clossified as lJnquolified, ond Amending Certoin Provisions of RMC No.42023 Pase 5 of 7

3. The ten percent (1070) tax on cash and/or property dividends actually or constructively received from a domestic corporation, including a mutual fund company; 4. The capital gains tax on the sale, barter, exchange or other disposition of shares of stock in a domestic corporation; and 5. Regular income tax. The EWP under Section III ofthis Circular does not operate as a final withholding tax or as an income tax on the amount withdrau.n. Rather, it constitutes a statutory penalty imposed on account of the pr€mature withdrawal of PERA assets. The imposition of the EWP is separate and distinct from the foregoing tax exemptions and shall be attributable to the PERA assets actually withdrawn. Accordingly, taxes that are expressly excluded from the PERA exemptions under existing laws shall continue to apply in accordance with the National Internal Revenue Code of 1997, as amended, and relevant revenue issuances, irrespective of whether the related income is derived from PERA investment products. These include, among others: Percentage taxes on porsons exempt from value-added tax, domestic carriers and keepers of garages, international carriers, franchise holders, overseas dispatch, message or conversation originating from the Philippines, banks and non-bank financial intermediaries performing quasi-banking functions, otler non-bank finance intermediaries, life insurance premiums, agents of foreign insurance companies, amusement, and winnings; 2. Value-added tax; 3. Stock transaction tax on the sale, barter, or exchange of shares of stock listed and traded LrrREVENUE DIVISION through the local stock exchange; and _a!)! I l-. - AU6 112026 4. Documentary stamp tax. ffi V. RESPONSIBILITY OFPERAADMIMSTRATORS ADMIN UNIT. 1 +un s ZT BY; TI For purposes of,this Circular, it is reiterated that the PERA Administrator shall be responsible for the adminisfration, oversight, and mainter,rance ofthe contributor's PERA accounts and sub-accounts. The PERA Administrator shall likewise compute and withhold the applicable EWP from the proceeds due to the contlibutor, in accordance with the foregoing provisions, and shall repon and remit the.same to the Bureau pursuant to RR No. 2-2022 and RMC No. 45-2022. VI. REPEALINGCLAUSE All provisions of RMC No. 4-2023, and other revenue issuances or portions thereof, which are inconsistent with the provisions of this Circular are hereby repealed, amended, or modified accordingly. Clorilrcotion ol the Bose Amount lot .the lmposition oJ the 20ld Penolty Relotive to the Eorly Withdtdwol ol PERA asseb, Accounte ond Sub- occounb Closstfied os Unquolifed, ond Amending Cettoin P@visiotl6 oI RMC No. 4'2023

VII. EFFECTIVITY This Circular takes effect immediately. All intemal revenue ollicials and epployees are hereby enjoined to be guided accordingly and to gi ve thi s Circular as wide publicity as possible. CHARIJTO MARTIN R MEN Commissioner of Intemal I-2lmos ro SURS 9"p,,$$^n,.q,?,-,, MA} RECCIDS IAGEMENT DIVISION AU6 112026 ffi BYr ADMIN UNI I;,1-!4 Aodfrcotion ol the Bose Amount fot the lmpositton oJ the 2@6 Paolty Relotive to the Eott Withdrowol of PERA asseB., accounts ond SUE occoona dossified os Unquolifred, ond anending Cettsin Prcvisions of RMC No. +2023