Whether the Personnel Economic Relief Allowance (PERA) is Subject to Income Tax and Consequently to Withholding Tax

April 23, 1992 BIR RULING NO. 133-92 21 (a) 71 000-00 133-92 Philippine Association of Court Employees 4th Floor, City Hall, Manila Gentlemen : This refers to your letter dated November 21, 1991 requesting for a ruling as to whether or not the Personnel Economic Relief Allowance (PERA) is subject to income tax and consequently to withholding tax. In reply, please be informed that in pursuance of the President's directive in her Memorandum Circular No. 145 government offices, agencies and instrumentalities including government-owned and controlled corporations should now stop deducting or withholding any income tax on PERA for 1992. However, pending resolution of our request for reconsideration of the Opinion of then Secretary of Justice Franklin M. Drilon stating that PERA, like RATA should not be subject to the mandatory withholding tax, the concerned employees may file in writing with the BIR, Attn.: Appellate Division, their individual claims for refund of the withholding tax on PERA for 1991 or those already paid to them, within two (2) years after the payment of the tax pursuant to Section 204 of the Tax Code, as amended. Appropriate action on the claim for refund will accordingly be taken as soon as a reply to said request for reconsideration is received from the Office of the President. It should be understood however, that should our request for reconsideration be upheld, you will resume the deduction and remittance of the withholding tax on PERA for 1992. Corresponding deduction shall likewise be made from employees to cover PERA already paid to them which have not been subjected to withholding. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue