Question & AnswerQ&A (BIR REVENUE REGULATIONS NO. 13-98)
A non-stock, non-profit corporation or organization is a corporation or association/organization created or organized under Philippine laws exclusively for religious, charitable, scientific, athletic, cultural, rehabilitation of veterans, or social welfare purposes, and no part of its net income or asset shall inure to the benefit of any member, organizer, officer, or specific person.
An NGO is a non-stock, non-profit domestic corporation or organization organized and operated exclusively for scientific, research, educational, character-building, youth and sports development, health, social welfare, cultural, or charitable purposes, whose net income does not inure to any private individual, and which meets specific utilization, administrative expenses, and asset distribution criteria.
An accredited NGO must utilize donations directly for its active conduct of activities within 15 days from the third month after its taxable year, keep administrative expenses within 30% of total expenses annually, and ensure that in case of dissolution, assets go to another accredited NGO or the State for public purposes.
The accrediting entity is a non-stock, non-profit organization composed of NGO networks, duly designated by the Secretary of Finance to establish and operationalize a system of accreditation, such as the Philippine Council for NGO Certification, Inc. (PCNC).
Donations to accredited non-stock, non-profit corporations are allowed limited deductibility (10% for individual donors and 5% for corporate donors), while donations to accredited NGOs are allowed full deductibility subject to compliance with the utilization and administrative expense requirements. Such donations are also exempt from donor's tax subject to limitations on administrative expenses.
Prohibited transactions include lending income or property without security or reasonable interest (unless as part of an approved micro-credit program), buying securities/property above consideration, selling below consideration, diverting income or property to related persons, using income/property for non-charitable purposes, and engaging in illegal activities.
They must apply to the accrediting entity submitting Articles of Incorporation, SEC registration, affidavit of modus operandi, and financial statements or projections. The accrediting entity evaluates based on mission and goals, resources, program implementation, and planning capability. Accreditation may be granted for 3 or 5 years depending on the organization's status.
The BIR may cancel their Certificate of Registration as qualified-donee institutions. However, donations to them during this three-year period will still be deductible subject to the regulations, but after the period, only donations to accredited entities will be deductible.
They oversee, monitor, and coordinate with the accrediting entity to ensure compliance with these regulations and may sit as ex-officio members with voting rights on the accrediting entity's board. They also grant certain waivers and approvals related to fund utilization and accreditation.
Donors must submit Certificates of Donation indicating actual receipt by the accredited donee, amount or acquisition cost, date of receipt, and for donor's tax exemption, additional valuation such as zonal value for real property or depreciated/book value for used personal property.
They must file an annual information return including a list of donations and income, list of activities/projects and their costs, status of fund balances especially amounts set aside, declarations of compliance with regulations, non-inurement to private individuals, and status of project implementation.
Donations are deductible up to 10% of the donor's income derived from trade, business, or profession for individual donors, and 5% for corporate donors, computed without the benefit of the deduction for the taxable year.
The donor will be deprived of the benefits of limited or full deductibility of donations, and donor's tax including penalties will be assessed and collected. Additional administrative or criminal penalties may also apply.
The administrative expenses must not exceed 30% of the accredited NGO's total expenses for the taxable year.
Approval may be granted if the project is certified by the Accrediting Entity as better accomplished by setting aside funds and the NGO submits a detailed application including project nature, purpose, description, estimated costs, sources of funds, and a statement that the funds will be disbursed within five years unless impracticable.