RMC No. 4-2023 — Clarifies the base amount for the imposition of the 20% penalty relative to the early withdrawal of Personal Equity and Retirement Account (PERA) for assets, accounts and sub-accounts classified as unqualified

BUREAU OF INTRNAL REVENUE RECORDS MIT DIV[SION

BUREAU OF INTERNAL REVENUE REPUBLICOF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City REOECHWCID IAN 1 O Z023 25 Am

January 9, 2023

REVENUE MEMORANDUM CIRCULAR NO.- 2O23

SUBJECT . Clarification of the Base Amount for the Imposition of the Twenty Accounts Classified as Unqualified Percent (20%) Penalty Relative to the Early Withdrawal of Persona) Equity and Retirement Account (PERA) for Assets, Accounts and Sub

TO : All Internal Revenues and Employees Concerned

the imposition of a flat rate of twenty percent (20%) applied to the total gross income earned by the PERA in cases of "unqualified early withdrawal". This Circular is being issued to clarify, by way of illustrations, the base amount to be used in

I. DEFINITION OF TERMS

and phrases shall have the following meaning: For common and better understanding of the terms used in this circular, the following words

PERA Assets -refers to the aggregate assets in the PERA at any one time, which include the cash funds and the PERA investment products into which they are .invested and re-invested and all the income earned therefrom.

Account -- pertains to the main account corresponding to one product category of PERA investment products as enumerated under Annex "A" 3(h) of the PERA Rules.

Sub-Account -- pertains to the specific PERA investment from different issuers under the same category

Qualified Early Withdrawal -- is the withdrawal, whether in full or in part, which is not subject to the Early Withdrawal Penalty (EWP), where the reasons for 'the withdrawal fall in any of the following:

a. For the payment of accident or illness-related hospitalization in excess of thirty (30)

b Permanent /Total disability of the contributor; or days; or

C. Transfer of PERA Assets to another qualified PERA investment product and/or

another PERA Administrator within fifteen (15) days from withdrawal thereof.

investments. of partial withdrawal, to be used for the above circumstances will not affect other existing sub-accounts. No automatic termination shail result to the whole PERA Under qualified early withdrawal, the specific sub-account to be withdrawn, in case

the reasons for the withdrawal are not among those cited above; hence, subject to EWP. Unqualified Early Withdrawal -- is the withdrawal, whether in full or in part, where

RECORYS 'S DIVYSON

JI. IMPOSITION OF EARLY WITHDRAWAL PENALTY HEHH ar.m JAN 1 0 Z023 +v!N-1

penalty, composed of the 20% of the gross income earned by the PERA for the entire duration and the 5% tax credit availed, shall be imposed on any early withdrawai not within the circumstances enumerated under Section 10 (B) of the aforesaid regulations. Any.loss incurred on PERA sub- accounts shall not be deducted from the gross income earned. Pursuant to Section 10(C) of Revenue Regulations (RR) No. I7-2011, the early withdrawal

automatic termination of all other sub-accounts. Below is an illustration on the computation of EWP and PERA proceeds upon termination of the account: Under "unqualified early withdrawal", the withdrawal of a sub-account will result to the

Account account Sub- A PERA Assets Income Earned B Incurred Loss C Penalty on {B x 20%} Income Earned 2% D Granted* EWP Credit Tax E (D+E) Tota] F Termination (A+B+C-F} Proceeds G

UITF=100,000 UITF = ABC MM 20,000 5,00 1,000 I,000 2,000 23,000

50,000 UITF= DEF Bond 3,00 600 2,500 3,100 49, 900

UITF 30,000 Equity GHI -2,000** I, 500 1,500 * 26,500

Total 100,000 8,00 -2,000 1,600 [ 5,000 6,600 99,400

In the assumption that the tax credit granted has been utilized already. granted shall be tagged as invalid and can no longer be used as payment for tax liabilities. In case of non-utilization of tax credit, the same shall not form part of the EWP. However, the tax credit

**The loss incurred in any sub-account shall not be offset from the gross income of other sub-accounts.

pursuant to RR No. 2-2022 and RMC No. 45-2022. responsible for administering, overseeing and maintaining of accounts/ sub-accounts of the contributor's PERA; and shall compute and withhold the EWP from the proceeds due to the contributor, consistent with the above provisions, for reporting and remittance to the Bureau For the purpose of this regulation, -it is reiterated that the PERA Administrator shall be

and give this Circular as wide a publicity as possible. All internal revenue officials, and employees are hereby enjoined to be guided accordingly.

ROME UMAGOI JR Com mssioner of Internal Revenue

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