DOF mulls higher PERA ceiling; REIT in limbo
The Department of Finance (DOF) is open to raising the maximum annual contribution under the Personal Equity and Retirement Account (PERA), while keeping the launch of the long-delayed Real Estate Investment Trusts (REIT) in limbo.
Finance Secretary Carlos G. Dominguez III said they are considering to increase PERA’s current R100,000 yearly contribution ceiling, noting the government is willing to giving out additional tax perks as long as they are assured it will help develop the local capital market.
“I told Tonette [Finance Undersecretary Antoinette C. Tionko] that why don’t we increase the amount, PERA is only R100,000. I told her to find a way, let’s encourage people to invest in the capital market and I don’t mind giving an additional benefit,” Dominguez told reporters.
Created by virtue of the PERA Act of 2008, the law aims to help Filipinos plan for a better retirement by supplementing existing pension schemes provided by the Social Security System and the Government Service Insurance System.
PERA grants certain tax privileges to those who have contributed a maximum of R100,000 a year, for at least five years, as long as the investment is kept in the PERA until the age of 55.
Overseas Filipinos may contribute up to a maximum of R200,000 a year. It only a takes a minimum of R1,000 to open a PERA.
Meanwhile, Dominguez admitted the implementation of the REIT law remains in limbo, adding the DOF has yet find the safeguard against investors who will take profits from the tax-free asset transfers by taking it out of the Philippines.
“Actually I’ve been thinking about that for a long time, and we haven’t found a way to assure ourselves that the funds that will be exempted from tax will actually be recycled into investment,” Dominguez said.
“If I can find a way to assure ourselves that whatever funds coming in without any VAT [valueadded tax] are recycled, yes will do it! But I don’t know how to do it,” he added.
Dominguez also welcomes plans by the lawmakers to repeal Republic Act No. 9856, otherwise known as the REIT Act of 2009, but he maintained the DOF will not implement the measure until the loopholes are addressed.
“They can amend the law, do what they want, but until I am assured that the funds are going to be recycled in a productive way, I will not implement it,” the finance chief declared.
“Like the other administration, they did not implement it. I don’t know what their reason was, but my reason is I don’t mind giving a tax free if it is reinvested, it’s okay. But if it’s not reinvested and sent to buy property abroad that doesn’t make sense, right?” Dominguez said.
The REIT Act lapsed into law in 2009 but was stalled by issues on minimum public ownership (MPO) and tight taxation framework.
The Duterte administration had planned to revive the stalled measure aimed at promoting the development of the country’s capital market, thus expanding the participation of the public in the ownership of real estate.