BIR clarifies rules on early PERA withdrawals

MANILA, Philippines — The Bureau of Internal Revenue (BIR) has clarified the rules on early withdrawals from Personal Equity and Retirement Accounts (PERA), noting that the 20 percent penalty will apply only to income attributable to the portion actually withdrawn.

Under Revenue Memorandum Circular 91-2026, the BIR stated that the 20 percent Early Withdrawal Penalty (EWP) applies only to the gross income attributable to PERA assets actually withdrawn.

Income, unrealized gains and other PERA assets that remain invested are excluded from the penalty base, it added.

“Simply put, you can manage one part of your PERA without unnecessarily exposing the rest of your retirement portfolio to the early-withdrawal penalty. This gives investors more flexibility and greater certainty in managing their retirement savings,” BIR Commissioner Charlito Martin Mendoza said.

For investors, this means withdrawing from one part of their PERA will not unnecessarily affect the rest of their portfolio.

“The remaining PERA investments stay intact, while the 20 percent early-withdrawal penalty and the recovery of the five percent tax credit apply only to the assets actually withdrawn,” Mendoza added.

PERA is a voluntary retirement savings program created under Republic Act 9505 that offers tax incentives to individuals and their employers who set aside funds for retirement.

The program is designed to supplement existing retirement and social protection systems such as the Social Security System and the Government Service Insurance System, as well as other savings and investment instruments.

BIR also said taxes not expressly covered by the PERA exemptions, including stock transaction tax, value-added tax, documentary stamp tax and applicable percentage taxes, continue to apply under existing law.

PERA administrators will be responsible for calculating, withholding, reporting and remitting the applicable early withdrawal penalty, according to the circular.

The BIR said the issued clarification is part of the tax agency’s taxpayer-centric approach to reform under BIR DARES, particularly its push for clearer rules, more predictable tax administration and improved taxpayer service.

“This is consistent with the direction of President Marcos and Finance Secretary Frederick Go to improve the ease of doing business and strengthen investor confidence. Under BIR DARES, we are reviewing our rules with a taxpayer-centric approach – clarifying requirements, removing unnecessary uncertainty and making tax administration more predictable,” Mendoza said.