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Manila Bulletin devider Business devider Banking & Finance devider BIR clarifies PERA early withdrawal tax rules to protect investors

BIR clarifies PERA early withdrawal tax rules to protect investors

Published Aug 17, 2026 08:42 am
BIR Commissioner Charlito Martin R. Mendoza
BIR Commissioner Charlito Martin R. Mendoza
The Bureau of Internal Revenue refined tax regulations governing early withdrawals from personal equity and retirement accounts (PERA) to shield long-term savings while providing investors greater portfolio flexibility.
Under Revenue Memorandum Circular No. 91-2026, issued Aug. 11, the tax authority clarified that the 20 percent early withdrawal penalty applies strictly to the gross income generated by the specific PERA assets withdrawn.
Any remaining income, unrealized gains, and principal assets left inside the account are fully exempt from the penalty base.
Furthermore, capital proceeds generated from selling or redeeming PERA investments will not trigger an early withdrawal penalty provided those funds remain within the designated PERA custody account for future reinvestment.
The refined guidelines address a key friction point for individual investors by ensuring that partial account adjustments do not penalize an entire retirement portfolio.
When a contributor executes a partial distribution, the 20 percent early withdrawal penalty and the recovery of the five percent tax credit attach solely to the targeted assets.
Other sub-accounts and underlying holdings inside the PERA structure remain entirely intact and unaffected by the transaction.
The BIR emphasized that the ruling provides individuals with clearer parameters when managing liquidity needs against long-term financial goals. Investors can reallocate or liquidate specific holdings without exposing their remaining retirement balances to unexpected tax liabilities or systemic penalties.
The circular also defined the boundaries of PERA’s overarching tax privileges. While qualifying contributions and distributions enjoy specific statutory exemptions, transactional taxes not explicitly waived under the PERA law remain fully enforceable.
Investors remain subject to the stock transaction tax, value-added tax, documentary stamp tax, and applicable percentage taxes under existing revenue statutes.
PERA administrators retain the administrative responsibility for calculating, withholding, reporting, and remitting all early withdrawal penalties directly to the government.

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Bureau of Internal Revenue (BIR)
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