The Philippine Stock Exchange (PSE) expects the implementation of the Personal Equity and Retirement Account (PERA) Act soon after the recent approval of its implementing rules and regulations (IRR) by regulators led by the Bangko Sentral ng Pilipinas.

However, the revenue regulations for the PERA Act have yet to be approved by the Department of Finance (DoF), and the Bureau of Internal Revenue (BIR).

“The next challenge is coming up with the revenue regulations that will implement the tax provisions of the law. We hope that the tax regulations will not water down the tax incentives given by the basic law, otherwise the purpose of the law to encourage savings and investments in the local capital markets will be defeated,” PSE president Francis Lim said.

The PERA Law establishes the legal and regulatory framework for the creation of a voluntary personal savings and investment plan as a means of providing financial security to PERA contributors during their retirement years.

Aside from the BSP, the IRR approval was also in coordination with the Securities and Exchange Commission, the DoF, Office of the Insurance Commissioner, and the BIR.
Lim said the approval of the IRR is a welcome milestone in sustaining the momentum for Philippine capital market reforms.

“Given that our regulators already approved the implementing rules for the PERA, we hope that various market players will soon apply as PERA administrators, investment managers and custodians so that interested individuals may already open PERA accounts as early as now,” added Lim.

In order to encourage individuals to establish PERA accounts, the PERA Law provides the following perks: A tax exemption for all income earned from PERA investments and reinvestments and all distributions upon death or retirement, provided that in case of retirement, the contributor has reached the age of 55 and made contributions for at least five years; a tax credit equivalent to five percent of the member’s maximum annual PERA contribution; and a tax deduction for employers who contribute to the PERA account of their employees.

Furthermore, PERA assets shall not be considered as assets of the contributor for purposes of estate taxes.

“Since PERA contributions must be invested solely in PERA investment products in the Philippines, we see the creation of PERA accounts as a new source for long-term investments which may be channeled into our local capital markets,” Mr. Lim said.