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Philippines Issues Retirement Account Tax Regulations

Friday, November 4, 2011

The new revenue regulations to implement the tax provisions of the Personal Equity and Retirement Account (PERA) Act have been issued by the Philippines Bureau of Internal Revenue (BIR).

The PERA Act was issued in 2008 in order to provide a framework for encouraging retirement savings in the country, and the tax incentives provided therein should have taken effect on January 1, 2009. The BIR had finally put a proposed consultation draft of the PERA pension fund tax rules on its website last month, and has now issued the final regulations, which will come into effect on January 1, 2012.

Under the Act, each person, who has the capacity to contract and has a tax identification number, can invest up to PHP100,000 (USD2,3400) in approved PERA funds – with married couples benefiting from the double allowance of PHP200,000 – while overseas Filipino workers (OFWs) can also invest up to PHP200,000.

Contributions up to those limits will be granted an income tax credit of 5% of the annual contributions made. OFWs can claim the credit against any national internal revenue tax liability.

Income from the investments will be free of tax – in particular, from regular income tax, the final withholding tax on interest, and capital gains tax – provided that each specific investment product must be approved by the appropriate regulatory authority. However, other taxes, such as value-added tax, stock transaction tax and documentary stamp taxes will remain payable.

If an employer makes a contribution to the PERA of an employee (in addition to the employer’s contribution to national social security), it shall not form part of the employee’s taxable gross income, and the employer will be able to claim it as deduction from his gross income, but only to the extent that it would complete the maximum allowable contribution of the employee.

Investments in excess of the maximum contribution will not be allowed the tax credit, nor will investments ceased or withdrawn within a minimum five-year period. Investors will normally be allowed to access their PERA funds when reaching the age of 55.

Proceeds of approved funds can be invested, for example, in unit investments trust funds, annuities, insurance pension products, shares traded in the Philippine Stock Exchange, government securities and exchange-traded bonds. The regulations also stipulate the duties and responsibilities of PERA market participants, such as fund administrators, investment managers, and custodians.

In addition to providing supplementary retirement benefits (over and above the state pension), it has been said that the availability of PERA funds would bring investment opportunities to small retail investors and help to develop the domestic capital market. The BIR has also warned that it would be likely to reduce the government’s tax revenue by PHP12bn on an annual basis.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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