Manila: The Bureau of Internal Revenue (BIR) has clarified that the 20 percent early withdrawal penalty (EWP) from Personal Equity and Retirement Accounts (PERA) is limited to the earnings from PERA assets actually withdrawn.

According to Philippines News Agency, in the Revenue Memorandum Circular (RMC) 91-2026 issued on August 11, the BIR stated that income, unrealized gains, and other PERA assets that remain invested are excluded from the penalty base. It also mentioned that proceeds from the sale or redemption of PERA investments that remain within the PERA custody account for reinvestment are 'not considered an early withdrawal.'

Commissioner Charlito Martin Mendoza explained that this allows investors to manage one part of their PERA without exposing the rest of their retirement portfolio to the early-withdrawal penalty, thus providing more flexibility and certainty in managing retirement savings. For partial withdrawals, the EWP applies only to the income attributable to the portion withdrawn, leaving other PERA sub-accounts and investments unaffected.

The RMC further clarifies the scope of PERA tax exemptions, specifying that taxes not expressly covered by the PERA exemptions will continue to apply under existing law. These taxes include stock transaction tax, value-added tax, documentary stamp tax, and applicable percentage taxes. PERA administrators are tasked with computing, withholding, reporting, and remitting the applicable EWP.

The BIR emphasized that this clarification is part of its efforts to establish clearer rules, predictable tax administration, and improved taxpayer service. This initiative aligns with President Ferdinand R. Marcos Jr. and Finance Secretary Frederick Go's direction to enhance the ease of doing business and boost investor confidence.

Commissioner Mendoza noted that under BIR DARES, the bureau is reviewing its rules with a taxpayer-centric approach, aiming to clarify requirements, reduce uncertainty, and make tax administration more predictable.