This is part 3 of the “Where to Invest in 2010” series which tries to compare the two investment vehicles with tax incentives: PERA and CTRP. Part 1 dealt with the Filipino investor profile while part 2 discussed the 5 stages of Life Cycle Investing.
In your journey to financial freedom, one inevitable expense that you would have to deal with is taxes. It is not enough that you make a lot of money. It also matters how much you keep.
Who is richer? A person who makes $100,000 a year and pay $50,000 in taxes? Or someone who earns only $70,000 and only pays $5,000 in taxes? The answer is simple. The one who keeps the more money (after taxes).
Investment w/ Tax Incentives: PERA vs CTRP
According to Efren Cruz, the author of the book “Pwede Na! The Complete Pinoy Guide to Personal Finance”, there are two investment vehicles that offer tax incentives. There is PERA (Philippine Equity Retirement Account) and CTRP (Comprehensive Tax Reform Package).
Here are the main differences between PERA and CTRP:
|
Criteria |
PERA |
CTRP |
| Contribution > Non-OFW > OFW |
<= PhP 100,000 <= PhP 200,000 |
no limit no limit |
| Max # of accounts | 5 | none |
| Tax Benefits on Financial Instruments | ||
| > Capital Gains > Interest Income |
exempt exempt |
exempt if tenor > 5 years exempt if tenor > 5 years |
| Tax Benefits on Stocks | ||
| > Capital Gains > Interest Income |
exempt exempt |
taxable 10% |
| Tax Credit | 5% of contribution | none |
| Administration | with | none |
As you can see there is a LOT of tax advantages for both types of accounts. Having a tax exempt investment is like saving at least 20% of your income. It’s money that you keep.
Rich Money Habits Thoughts:
To be honest, I haven’t given much thought about retirement until I learned about the tax incentives from the seminar. I understand that there’s a mandatory SSS or GSIS in the Philippines. I also read about 401K and Roth IRA accounts in the US but I am not sure if there’s anything similar to it in the Philippines.
There’s still a lot more to learn about retirement accounts in the Philippines, but the tax incentives definitely caught my attention. The tax benefits from PERA and CTRP are incredible.
Unfortunately, for reasons I still don’t understand, PERA is still not available in the Philippines. I guess I’ll have to wait until it becomes available. As for CTRP, it was my first time to hear about it during the seminar, so I really don’t have any clue.
My only hope is that I’d be able to learn and take advantage of both financial vehicles and share it to readers of this blog some day.
How about you? How are you planning for your retirement? Have you taken advantage of any tax incentives for your investment accounts?