How to Register a Non-stock Non-profit in the Philippines?

By: Tax and Accounting Center Philippines

You may have a charitable mind and a big heart having in mind the general welfare of the less privileged and the needy, or you may simply want to operate a non-stock, non-profit entity for a reason or another, this article could be of help.

Non-stock and non-profit corporation in the Philippines is one who operates for a not-for-profit undertaking such as charitable institutions, associations, foundations, health organizations, environmental activities, and others in line. It does not issue shares of stocks to stockholders but rather admit members based on established rules in its By-laws. Its operational funds could come from donations, members contributions, and some proceeds from fund raising activities. For tax purposes, it could be exempted from income tax and value added tax on sales  based on BIR Ruling issued. It is however subject to withholding taxes on its income payments and compensation, and could be passed on 12% value added tax on its purchases from VAT-registered suppliers.

Details of incorporators 

To register a non-stock, non-profit corporation, you need to have the following to start with:

1. At least five (5) incorporators, majority of them must be residents in the Philippines;
2. Complete address of each incorporator;
3. BIR Tax identification number (TIN) of each incorporator;
4. Contribution of incorporators and members;

Based on the above details, you may now proceed with the documentation. Securities and Exchange Commission (SEC) in the Philippines would require the following documentary requirements:

Basic SEC Requirements

• Name verification slip of the company name to be used. This should be reserved manually with the Securities & Exchange Commission (SEC) for minimal fees – P40.00 for every 30 days up to a maximum of 90 days subject to renewal or online through the SEC -Register;
• Articles of Incorporation and By-laws;
• Joint affidavit of two (2) incorporators undertaking to change name;
• List of members, as certified by the corporate secretary, unless already stated in the Articles of Incorporation; and,
• List of names of contributors or donors and the amounts contributed or donated, as certified by the treasurer.

Additional SEC Requirements

• For Foundation – Notarized certificate of bank deposit of the contribution of not less than P1M along with statement of willingness to allow SEC to conduct an audit;
• For Religious Corporation – Refer to Setions 109-116 of the Corporation Code of the Philippines, and an affidavit of affirmation or verification by the chief priest, rabbi, minister or presiding elder;
• For Federations – Certified list of member-associations by Corporate Secretary or President;
• For Condominium corporations or associations -Master Deed with primary entry of the Register of Deeds and certification that there is no other existing similar condominium association within the condominium project.

SEC in the Philippines has a set of express forms for some ready to fill-out SEC registration forms.  Alternatively, you may have your own customized forms and documents that is in accordance with the format of SEC in relation to the provisions of the Corporation Code of the Philippines applicable to non-stock, non-profit corporations in the Philippines. You may need an assistance of a lawyer or  somebody with better appreciation of the requirements for registering a non-stock, non-profit corporation in the Philippines.

SEC application and approval

Initial registration papers carefully prepared for the purpose will undergo initial evaluation of the SEC, and finding the same in order will be assessed filing and other fees based on the proposed capitalization. Payment of the filing and other fees marks the formal filing of the application and normal approval procedures would immediately follow. Approval normally comes in a couple of days to not more than ten (10) days.

Tax Authority Registration

SEC will assign a tax identification number (TIN) upon release of the Certificate of Incorporation  in the Philippines and such TIN shall be formally registered with the Bureau of Internal Revenue (BIR). Certain registration fees and taxes will be paid and other registrations for books of accounts, and official receipts or invoices will follow. For tax exemptions of non-stock non-profit corporation in the Philippines, you need to secure BIR ruling with the tax authority with the Revenue District Office (RDO) of registration.

Business Permits & Licenses

For the legality of its local operations, business permit has to be secured with the local government unit of business location. Certain fees and other registrations are likewise required such as community tax certificate, barangay clearance, fire permit, occupancy permit, and the likes.

Employee safeguards registrations

Employer registration with the Social Security System (SSS), Philippine health Insurance Corporation (Philhealth), and Home Development Mutual Fund (HDMF) is likewise mandatory and will proceed independent of the above.

Complete Processing Timetable

With the improved processing system of the government agencies, complete processing of the above will take three (3) to four (4) weeks from filing with the Securities and Exchange Commission. We suggest you secure the services of professionals to assist you in the complete registration of your Philippine Company that you may be able to simply concentrate on operational matters.

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org.)

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By: Garry S. Pagaspas

The present flooding brought about by habagat winds is my third walk in the floods on my way home – F.B. Harisson near corner Vito Cruz, Manila.

• Sometime in 2007 typhoon where heavy rains flooded Makati Area giving me no choice but to walk from SM Ayala, Makati to home for about two (2) hours.
• During thypoon Ondoy where I have to walk from PUP Taguig near SM Bicutan to home  for more than four (4) hours.
• Last August 6, 2012, was my walkaton from Starbucks Columns, Makati to home for an hour and a half (1.5hrs) going through Buendia Avenue and F.B. Harrison. I could relate how it felt to get wet for a number of hours and to walk over flooded streets with all the risks. In those times I wish for help but would prefer to do it myself so help would go to the more needy ones.

It is in these times that each one of us capable of doing anything good to others  in need must gave no hesitation. I was trying to figure out how to extend a hand for myself until  this article writing crossed my mind to knock some hearts. I would love to relate some tax aspects in an attempt to help, in a way or another.

Taxpayers,  please donate to Habagat Flood victims in the Philippines

I have this principle that if given a choice, I wuld rather help than be helped. The very heart of donating is the satisfaction seeing other’s happiness with the things we give, no matter how small or big. We become happier with seing the smiles on thier faces without anticipation of a return.

Another good thing you could enjoy with you donation is the tax deduction for income tax purposes. Your donatios to accredited donee institions such as charitable institutions and foundations are 100% deductible expense from your quarterly or annual income tax return.

Example: If you donate P100,000 for Habagat Flood victims in the Philippines, be it for Metro Manila or nearby provinces, the entire amount is allowed as a deduction from your gross income in computing your taxable income.

With the 30% income tax rate for corporations, or 5-32% income tax rate for sole proprietors, the taxable net income will be reduced by P30,000, m0re or less. It is as if you only donated P70,000 because of the tax benefit, so you may consider donating more for more tax benefits. They will provide you Certificate of Donation that you will use as support on the claim of deduction. Likewise, these donations are exempt from donor’s tax of 30% or 2-15% for relatives.

Same 100% income tax benefit deduction will apply to donations to government institutions under priority of NEDA. On the other hand, if donations are made to non-accredited donee institutions, then, your allowable deductions as charitable contributions shall be limited to not more than 5% of corporate taxable net income before charitable contribution or not more than 10% for individuals. If you do it yourself, directly giving relief goods and other necessaries, then, it might not be deductible because it is not an ordinary or necessary business expense. Justifying the same as a corporate social responsibility (CSR) drive may not avoid the issue on substantiation and relation of the expense to business operations.

Please do not get me wrong. I am not saying, you donate for the tax benefit. What I wish to state is that you help our fellow citizens (Kababayans) through giving some things you have that they may use them in this times of loss. In so doing, you may opt to claim tax deductions so you could donate more. If you are a pure compensation income earner, and not engaged in any trade or business or profession in the Philippines, your every donation is most welcomed even without the tax benefits. What matters is, that we share our blessings to those in dire need.

Thanks to the Office of the President, you can choose from among the list where to course through your donations of any kind. Please see at this link – EVACUATION & RELIEF OPERATIONS CENTERS. 

Casualty losses deduction for income tax purposes

For flooded taxpayers, you can also claim deductions for casualty losses – loss by flood as acts of nature. The BIR would require you to submit a notice of loss within forty-five days from date of casualty loss in the Philippines, and a proof of loss of such property used in trade or business or practice of profession. If such property is insured, then, you can only claim the excess of book value over the proceeds of the insurance.

During the typoon Ondoy, many suffered loss but only few were able to claim casualty losses for failure to submit with the BIR the proof of loss within the 45-day period. Notice of Casualty loss is a simple letter informing the BIR that the taxpayer’s specific property used in trade or business or practice of profession has been lost by acts of nature – Flood from Habagat Winds in the Philippines, and attaching therewith such documents and papers in support of the fact of loss such as Certifications from the barangay or city or other government agencies, and such other documents available.

Finally, the tax benefits are not the major necessity now. What matters is we save and preserve the lives of our fellow.So please, please, please, let us help those victims of the floods by giving anything of value – used clothing, relief goods,foods, clean drinking waters, or funds for their basic necessities.

May God Bless all those noble and giving hearts who will share thier earthly possessions for the flood victims, and we pray for the safety of the victims.

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.

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