Tax Treatment of Personnel Economic Relief Allowance (PERA)

March 11, 1992 REVENUE MEMORANDUM CIRCULAR NO. 15-92 SUBJECT : Tax Treatment of Personnel Economic Relief Allowance (PERA) TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, quoted hereunder is B.I.R. Ruling dated March 2, 1992: "March 2, 1992 "Ms. Ma. Mileguas M. Leyno Officer-in-Charge Accounting Division Commission on Audit Commonwealth Avenue, Quezon City "Madam: "This refers to your letter dated February 14, 1992 requesting that in view of the Memorandum Circular No. 145 of President Corazon C. Aquino, dated 17 January 1992, adopting the opinion dated 3 July 1991 of the Secretary of Justice that the Personnel Economic Relief Allowance (PERA) is not taxable, you be allowed to make the necessary adjustment on BIR Form W3 (Annual Return of Withholding Tax on Compensation Income) which will be submitted to this Office on or before the 28th of February, 1992, such that PERA will no longer be reflected in the BIR Form W2 (Statement of Income) of the individual employees for 1991 and that the excess tax withheld be refunded by your Office to your personnel. acd "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 TaxCode, 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. We shall also assess and collect from your office the corresponding tax on PERA already paid to your employees, but not subjected to withholding. "Very truly yours, (Sgd.) JOSE U. ONG Commissioner of Internal Revenue" On the other hand, since for taxable year 1991, the PERA has been subjected to the withholding tax and the same was remitted to the BIR, PERA should therefore be declared as income for 1991 and the tax withheld therefrom could be tax credited in the income tax return to be filed on or before April 15, 1992. As heretofore stated, the individual recipient - employees may, however, file a written request for refund of the tax withheld on PERA for 1991 with the BIR, Attn.: Appellate Division, within two (2) years after payment/remittance of the tax pursuant to Section 204 of the Tax Code. cdt It is desired that this Circular be given as wide a publicity as possible. (SGD.) JOSE U. ONG Commissioner of Internal Revenue