Provident fund is a fund set up voluntarily between the employer and employees to serve as a security for the employees in case of their resignation, retirement, disability, or death. A provident fund is regulated by the government through the “Provident Fund Act” to protect rights and benefits to which employees are entitled.

The objective of the Provident Act is not only to promote financial welfare to employees but also to strengthen the saving system and to build strong foundation for the country’s financial stability.

A provident fund established under the act has a juristic person status which is separate from the employer’s juristic person. A management company undertakes to control and manage the fund by a group of committee members who are appointed through election. The registrar as prescribed by law is The Securities and Exchange Commission (SEC). The SEC also monitors performance of the management companies in charge of provident funds.

1. Amounts contributed by employees are called “employee’s contribution” with the employees’ consent for deduction from their wage monthly from 2 per cent but no more than 15 per cent of the wages as prescribed in the fund’s articles.
2. Amounts contributed by employers are called “employer’s contributions” which shall not less than 2 per cent but no more than 15 per cent of the wages. Contribution rate may be different based on conditions, terms of employment, or duration of membership as prescribed in the fund’s articles.
3. Benefits derived from savings investment is called “benefit of employee’s contribution”.
4. Benefits derived from contributions investment is called “benefit of employer’s contribution”.

• Tax Benefits for Employers
  Employers may deduct the actual amount of contributions made to the fund in each accounting period as expenses.
• Tax Benefits for Employees
  Employees will receive tax benefits throughout duration of the provident fund membership as follows:

Upon benefits payout, the amount will be taxed in 3 scenarios as follows: