Tax Treatment of the Personnel Economic Relief Allowance (PERA) in View of the Memorandum Circular No. 145

September 16, 1992 BIR RULING NO. 266-92 21 (a) 71 164-92 266-92 Atty. Angel S. Ucat, Jr. Provincial Prosecutor Office of the Provincial Prosecutor of Bohol City of Tagbilaran S i r : This refers to your letter April 20, 1992 to then Honorable Executive Secretary, Franklin M. Drilon in effect, requesting clarification on the tax treatment of the Personnel Economic Relief Allowance (PERA) in view of the Memorandum Circular No. 145 of former President Corazon C. Aquino dated January 17, 1992. It appears that you have filed a joint income tax return with your wife which included the PERA she received for 1991. You contended that the action of the Bureau of Internal Revenue in requiring that PERA should be declared as part of income for 1991 is erroneous considering that the Office of the President has issued Memorandum Circular No. 145 adopting the opinion of the Secretary of Justice, Franklin M. Drilon dated July 3, 1991 that PERA is not taxable. 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 the Secretary of Justice 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 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, the deduction and remittance of the withholding tax on PERA for 1992 will be resumed. Corresponding deduction shall likewise be made from employees to cover PERA already paid to them which have not been subjected to withholding. LexLib Very truly yours, JOSE U. ONG Commissioner of Internal Revenue