In the Philippines, non-profit organizations (NPOs) and foundations are governed primarily by the Revised Corporation Code (Republic Act No. 11232). Unlike for-profit entities, these organizations are established for public good—ranging from charitable, religious, and educational purposes to cultural and civic service—where no part of the income is distributable as dividends to its members, trustees, or officers.
I. Defining the Legal Entity: Non-Stock Corporation vs. Foundation
Before beginning the registration process, it is critical to distinguish between a general non-stock corporation and a foundation.
| Feature | Non-Stock Corporation (General) | Foundation |
|---|---|---|
| Purpose | Broad: Religious, charitable, scientific, athletic, cultural, etc. | Specific: Generally for charitable, educational, or social welfare purposes. |
| Initial Contribution | No strict minimum (must be sufficient for operations). | Minimum of ₱1,000,000.00 initial capital/contribution. |
| Governance | Board of Trustees (at least 5 persons). | Board of Trustees (at least 5 persons). |
| SEC Requirement | Standard Articles and Bylaws. | Requires a "Modus Operandi" and specialized financial disclosures. |
II. Step 1: Registration with the Securities and Exchange Commission (SEC)
The SEC is the primary regulatory body that grants "juridical personality" to the organization. Without SEC registration, an organization cannot legally enter into contracts or open a bank account in its name.
- Name Reservation: Through the SEC’s Electronic Simplified Processing System for Applications for Registration of Company (eSPARC), you must verify and reserve a name. It must include "Inc." or "Incorporated."
- Articles of Incorporation (AOI): This document outlines the organization's name, specific purpose, principal office address, the names of the incorporators, and the names of the initial trustees.
- Bylaws (BL): These are the internal rules of the organization, detailing membership qualifications, meeting schedules, voting rights, and the duties of officers.
- Treasurer’s Affidavit: A sworn statement by the elected Treasurer certifying the amount of contributions received.
- List of Members: A certified list of the members of the association.
- Undertaking to Change Name: A formal commitment to change the name if the SEC finds it deceptively similar to an existing entity.
III. Step 2: Bureau of Internal Revenue (BIR) Registration
Securing SEC papers is only the beginning. To operate legally and potentially enjoy tax benefits, the organization must register with the BIR.
- Tax Identification Number (TIN): Required for all official transactions.
- Certificate of Registration (Form 2303): This dictates what taxes the NPO is liable for (e.g., Withholding Tax on employees).
- Tax Exemption Ruling: Under Section 30 of the National Internal Revenue Code (NIRC), certain non-stock corporations are exempt from income tax on revenue derived from their core purpose.
Note: Exemption is not automatic. The organization must apply for a formal "Confirmatory Ruling" or "Tax Exemption Certificate" from the BIR. Even with this, income from properties (rent) or profit-generating activities (merchandise) remains taxable.
IV. Step 3: Local Government Unit (LGU) Permits
NPOs must also secure permits from the city or municipality where their principal office is located:
- Barangay Clearance: Obtaining clearance from the specific local district.
- Mayor’s Permit (Business Permit): While NPOs are not "businesses," they are still required to obtain a permit to operate within the jurisdiction. Fees are often lower for non-stock entities.
V. Step 4: Secondary Licenses and Accreditations
Depending on the nature of the work, an NPO may need further certification to operate or to provide donors with tax-deductible receipts.
- DSWD Registration and License: Any NPO involved in social welfare (orphanages, elder care, etc.) must be registered, licensed, and eventually accredited by the Department of Social Welfare and Development.
- PCNC Accreditation: The Philippine Council for NGO Certification is the "seal of good housekeeping." Accreditation here allows the NPO to become a "Donee Institution," meaning donors can claim their donations as a full tax deduction.
- Department of Education (DepEd) or CHED: Necessary if the NPO operates a school or educational center.
VI. Annual Compliance Requirements
Once registered, the organization must maintain its good standing through annual filings:
- General Information Sheet (GIS): Filed with the SEC within 30 days after the annual members' meeting. It lists current trustees and officers.
- Audited Financial Statements (AFS): Filed with the SEC and BIR. If annual gross receipts are below a certain threshold (usually ₱600,000), a simplified financial statement may suffice, but most foundations require a full audit.
- Mandatory Disclosures: Under SEC Memorandum Circular No. 15 (Series of 2019), NPOs must submit a "Mandatory Disclosure Form" to prevent the organization from being used for money laundering or terrorist financing.
VII. Important Considerations
- Trustee Residency: While the Revised Corporation Code has relaxed residency requirements, it is still standard practice for a majority of the Board of Trustees to be residents of the Philippines.
- No Distribution of Profits: The most critical rule is that any "profit" made must be plowed back into the organization’s projects. Assets remaining upon dissolution must be donated to another similar NPO or the State, as dictated by the "Cy Pres" doctrine or the organization's dissolution clause.