Donations or gifts made by a corporation, an individual engaged in trade or business, or an individual engaged in the practice of his profession, to accredited non-stock, non-profit corporations or non-government organizations (NGOs) qualified donee institutions may be claimed as deduction from their gross income.

In addition, these donations are exempt from the donor’s tax. However, as a condition to the exemption from the donor’s tax, not more than thirty percent (30%) of the said donations and gifts for the taxable year shall be used by such accredited non-stock, non-profit corporations or NGOs for administration purposes.

The amount of donation that will be allowed as deduction from gross income is determined in accordance with the following rules:

1. Limited Deductibility. Donations, contributions or gifts actually paid or made within the taxable year to accredited non-stock, non-profit corporations must not exceed ten percent (10%) of the income of an individual donor, and five percent (5%) for a corporate donor. The maximum amount of deductible donation will be computed based on donor’s taxable income without the benefit of this deduction.

1. Full deductibility. The full amount of donations, contributions or gifts actually paid or made within the taxable year to accredited NGOs are allowed as deduction.

A non-stock, non-profit corporation/organization refers to a corporation or association organized under Philippine laws exclusively for one or more of the following purposes:

• Religious
• Charitable
• Scientific
• Athletic
• Cultural
• Rehabilitation of veterans
• Social Welfare

No part of the net income or asset of the corporation or association should belong to or inure to the benefit of any member, organizer, officer or any specific person.

On the other hand, a non-government organization (NGO) is a non-stock non-profit domestic corporation/organization organized and operated exclusively for any of the following purposes:

• Scientific
• Research
• Educational
• Character-building, youth and sports development
• Health
• Social welfare
• Cultural
• Charitable

In addition to the condition that no part of the net income inures to the benefit of any private individual, the entity must also comply with the following requisites to be considered as an NGO:

1. It utilizes the contributions directly for the active conduct of the activities constituting its intended purpose(s). This must be achieved not later than the 15^th day of the 3^rd month after the close of the taxable year when the contributions were received, unless an extended period has been granted by the Secretary of Finance.
2. The level of administrative expenses on annual basis does not exceed thirty percent (30%) of the total expenses for the taxable year; and
3. In the event of dissolution, the assets would be distributed to another accredited NGO organized for similar purpose, or to the State for public purpose.

In selecting the Accrediting Entity, the DOF must select the organization that has a countrywide membership composed of NGOs which belong to the sector that the Private Accrediting Entity intends to certify; NGOs which have been in existence for at least five (5) years; and NGOs not more than 50% of the members of which belong to other existing NGOs or private accrediting agencies. Based on this criteria, the Secretary of Finance has designated the Philippine Council for NGO Certification, Inc. (PCNC) as the Accrediting Entity.

Application for accreditation of donee institutions will be undertaken as follows:

1. Newly organized and existing non-stock, non-profit corporations and NGOs will apply with the Accrediting Entity for accreditation and submit to a process of examination and evaluation.
2. The Accrediting Entity will evaluate and accredit non-stock, non-profit corporations/NGOs using identified criteria such as mission and goals; resources; program implementation and evaluation; and planning for the future.
3. The Secretary of Finance, upon the recommendation of the Accrediting Entity, can waive the submission of audited financial statements for newly-organized non-stock, non-profit corporations/NGOs which have been organized to carry out programs of national significance.
4. The Accrediting Entity will issue a Certificate of Accreditation to qualified non-stock, non-profit corporation/NGO. This certification is valid for a maximum of five (5) years for existing non-stock, non-profit corporations/NGOs, and three (3) years for newly-organized institutions.
5. The Accrediting Entity shall notify applicants who fail to meet the criteria for accreditation. Such entities will have one year within which to implement the recommendations of the Accrediting Entity, after which it may re-apply for accreditation.

The Secretary of Finance and the BIR Commissioner will oversee, monitor and coordinate with the Accrediting Entity to ensure that the rules for accreditation as set forth under the regulations are complied with.

Those who have qualified as donee institutions under BIR-NEDA Regulations No. 1-81 are given three (3) years from the effectivity of the new rules within which to secure a Certificate of Accreditation from the Accrediting Entity. During this period, donations to these entities will still be allowed as deductible expense on the part of the donors. After the three-year period, only donations and contributions to non-stock, non-profit corporations/NGOs which have been newly accredited by the Accrediting Entity will be allowed as deduction from gross income.

The taxpayer must present the Certificate of Donation which accredited non-stock, non-profit/NGOs are required to issue on every donation they received. Following the prescribed BIR form, the certification is required to be distributed within thirty (30) days after the receipt of the donation. The certification should contain the following information:

• Actual receipt of donation
• Date of receipt
• Amount of donation if in cash. If the donation is in the form of a property, whether real or personal, the certificate must indicate the acquisition cost of said property.

For every donation worth over P1.0 Million, the donor is required to notify the BIR Revenue District Office where his business is located. The notice must be submitted within thirty (30) days after the receipt of the Certificate of Donation from the donee institution, which must be attached to said notice.

Upon filing of their income tax returns/annual information return, accredited non-stock, non-profit corporations/NGOs must furnish the BIR RDO of the place where it is located with the following information:

• List of donations received during the year showing the name and address of the donors; sources of income; amount or market value of each donation
• List of the activities and/or projects undertaken by the institution
• List of projects, their corresponding costs; the amount set aside and status of funds
• A declaration that the required utilization of the donations are complied with
• A declaration that no part of the net income inures to the benefit if any private stockholder or individual, and
• A declaration of the status of project implementation.