1.

As drafted, the Implementing Rules and Regulations (IRR) on

certifcation by the Philippine Council for !" Certifcation (PCC)
co#ers only the deductibility of donations to certifed !"s, as $ell as
e%emption from donors ta% of such donations. &he IRR does not pro#ide
for the income ta% e%emption of the PCC certifed accredited entities.
As a matter of fact, the Philippine &a% Code does not re'uire the ta%
e%empt entities enumerated under (ection )* of the &a% Code to secure
certifcation from an accreditation body in order that they may 'ualify for
income ta% e%emption under (ection )*. It is possible that the
+epartment of ,inance and bureau of Internal Re#enue may decide to
ma-e PCC certifcation a prere'uisite for income ta% e%emption for
some entities. .o$e#er, this matter has not yet been raised. &hus, the
income ta% e%emption $ould not be an issue in so far as PCC
certifcation is concerned.
In any case, (ection )* of the &a% Code pro#ides that /the income of
$hate#er -ind and character of the foregoing organi0ations from any of
their properties, real or personal, or from any of their acti#ities
conducted for proft, regardless of the disposition made of such income1
shall be sub2ect to the corporate income ta%. 3nder this pro#iso, ta%
e%empt entities $ould be sub2ect to the )45 corporate income ta% on
unrelated and recurring business income.
6. (ection )* of the &a% Code enumerates the entities e%empt from the
corporate income ta% as follo$s7
a. 8abor, agricultural or horticultural organi0ations not organi0ed
principally for proft7
b. 9utual sa#ings ban- not ha#ing a capital stoc- represented by
shares, and cooperati#e ban-s $ithout capital stoc- organi0ed
and operated for mutual purposes and $ithout proft:
c. A benefciary society, order or association, operating for the
e%clusi#e beneft of the members such fraternal organi0ations
operating under the lodge system or mutual aid association or
non stoc- corporation organi0ed by employees pro#iding for the
payment of life, sic-ness, accident, or other benefts e%clusi#ely
to the members of such society, order or association or
nonstic- corporation on their dependents:
d. Cemetery company o$ned and operated for the beneft of its
members:
e. on;stoc- corporations or associations organi0ed and operated
e%clusi#ely for religious, charitable, scientifc, athletic or
The Philippine Council for NGO
Certification (PCNC) &
The Philippine Tax Code
cultural purposes or for the rehabilitation of #eterans, no part of
$hose net income
f. or asset shall belong to or inure to the beneft of any member,
organi0er, o<icer or any specifc person:
g. =usiness league, chamber of commerce or board of trade, not
proft and no part of the net income of $hich inures to the
beneft of any pri#ate stoc-holder or indi#idual:
h. Ci#ic league or organi0ation not organi0ed for proft but
operated e%clusi#ely for the promotion of social $elfare:
i. A non;stoc-, non;proft educational institution
j. !o#ernment education institution:
k. ,armers> or other mutual typhoon or fre insurance company,
mutual ditch or irrigation company, mutual or cooperati#e
telephone company, or li-e organi0ation of a purely local
character, the income of $hich consists solely of assessments,
dues and fees collected from the members for the sole purpose
of meeting its e%penses: and,
l. ,armers>, fruit gro$ers or li-e association organi0ed and
operated as sales for the purpose of mar-eting the products of
its members and turning bac- to them the proceeds of sales,
less the necessary selling e%penses on the basis of the 'uality of
produced fnished by them.
"f the abo#e list, only donations to the entities under items (e) and (g) and
(h) are deductible and or e%empt from donor>s ta% under section)4 (.) and
(ection 1*1, respecti#ely, of the &a% Code. 9oreo#er, donations to some of
those entities are sub2ect to limited deductibility, i.e. only 1*5 (indi#idual
donor) and ?5 (corporate donor) of the ta%able income deri#ed from trade
or business as computed $ithout the beneft of the deduction.
Tabular Comparative Summary of Tax Exempt Entitie & !onee
"ntitution#
$ctivity "ncome
Tax
Exemption
%ull
!eductibility
&imited
!eductibility
!onorTax
Exemption
Religious @%empt ot
applicable
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt
Charitable @%empt Applicable if
accredited
!"
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt
(cientifc Research
(ote for purpose
of deductibility,
/scientifc1A
/reearch1 purposes
are defned
together)
@%empt Applicable if
accredited
!"
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt
Athletics Character
=uilding Bouth and
(ports
+e#elopment(ote
for purpose of
deductibility
1athletic purpose
has the same
defnition as
/character building
and youth and
sports
de#elopment1
@%empt Applicable if
accredited
!"
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt if
accredited
!"
Cultural @%empt Applicable if
accredited
!"
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt
Rehabilitation of
#eterans
@%empt ot
Applicable
Applicable if
accredited non;
stoc-, non;proft
corporation
ot
Applicable
(ocial Celfare @%empt Applicable if
accredited
!"
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt
@ducational @%empt Applicable if
accredited
!"
Applicable if
accredited non;
stoc-, non;proft
corporation
@%empt
otes7
/on;stoc-, non;proft corporation or organi0ation1 is created or organi0ed under
Philippine la$s e%clusi#ely religious, charitable, scientifc, athletic, cultural,
rehabilitation of #eterans and social $elfare purposes, no part of the net income or
asset of $hich shall belong to or inure to the beneft of any member, organi0er,
o<icer or any specifc person.
A /non; go#ernment organi0ation (!")1 has the follo$ing characteristics7
1. on; stoc-, non; proft domestic corporation or organi0ation organi0ed and
operated
e%clusi#ely for scientifc, research, educational, character;building and
youth and sports
de#elopment, health, social $elfare, cultural or charitable purposes, or a
combination
thereof :
6. o part of the income of $hich inures to the beneft of any pri#ate
indi#idual, the members
of the =oard of &rustees of $hich do not recei#e compensation or
remuneration:
). 9a-es utili0ation directly for the acti#e conduct of the acti#ities
constituting the purpose or
function for $hich it is organi0ed and operated not later than the ffteenth
(1?
th
) day of the
third month after the close of the !">s ta%able year in $hich contributions
are recei#ed,
unless an e%tended period is granted by the (ecretary of ,inance, upon
recommendation of
the Commissioner of Internal Re#enue:
4. &he le#el of administrati#e e%penses of $hich on an annual basis does not
e%ceed thirty
percent ()*5) of the total e%penses for the ta%able year: and
?. In the e#ent of dissolution, the assets of $hich shall be distributed to
another accredited
!" organi0ed for similar purpose, or the state for public purpose or
purposes, or $ould be
distributed by a competent court of 2ustice to another accredited !" to be
used in such
manner as in the 2udgement of said court shall best accomplish the general
purpose for
$hich the dissol#ed organi0ation $as organi0ed.
Prepared by 7
A&&B. C"R@8I" C
!I("
Corporate (ecretary,
PCC