Tax Incentives under RA 10165 or Philippine Foster Care Act of 2012

By: Tax and Accounting Center Philippines

Under Republic Act No. 10165 (RA No. 10165) and otherwise known as Foster Care Act of 2012, it has been a declared policy of the State to provide every child who is neglected, abused, surrendered, dependent, abandoned, under sociocultural difficulties, or with special needs with an alternative family that will provide love and care as well as opportunities for growth and development.  Under said RA No. 10165, a child may be placed under foster care for the provision of planned temporary substitute parental care to a child by a foster parent under certain condition and upon approval the Foster Family Care License of the Department of Social Welfare and Development (DSWD).

Apart from the regulations on foster child care in the Philippines, RA No. 10165 or Foster Care Act of 2012 in the Philippines provides for the following tax incentives and as such, the full text of RA No. 10165:

Foster child as additional dependent

Under Rule 23(2) of the Implementing Rules implementing Section 22(b) of RA No. 10165, a foster parent shall be allowed an additional personal exemption of P25,000 for each qualified dependent, to include the foster child if the period of foster care is a continuous period of one (1) taxable year.  However, the total number of qualified dependents remains at four or a total of P100,000, including the qualified foster child.

Income tax exemptions of agencies

Agency is a child caring or child-placing institution licensed and accredited by the DSWD to implement foster care program. Under Rule 24.1 of the Implementing Rules, implementing Section 23 of RA No. 10165, agencies shall be exempt from income tax derived by it as such organization pursuant to Section 30 of the National Internal Revenue Code, as amended, and as implemented by Revenue Regulations No. 13-1998.

Qualification as Donee Institution of the Agency

Agencies can also qualify as a done institution for tax incentives on donations to foster care programs. A separate application shall be filed with the prescribed government agencies for the purpose (e.g. BIR).

Donor’s tax exemption on donations to agency

Donations to the agency of concerned taxpayers are exempted from donor’s tax in the Philippines imposed under Section 101 of the National Internal Revenue Code , as amended. To qualify such donor’s tax exemption in the Philippines, not more than 30% of the amount of donations shall be spent for administrative purposes.

Donations as tax deductible expense

Donor’s to agency shall be granted allowable deductions from their gross income to the extent of the amount donated to agencies in accordance to Section 34(H) of the National Internal Revenue Code, as amended.

References:

• Republic Act No. 10165;
• Revenue Memorandum Circular No. 41-2013
• Implementing Rules and Regulations of RA No. 10165

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, or you may post a question at Tax and Accounting Center Forum and participate therein.