Instead of using their funds for charitable work, social welfare and development agencies (SWDAs) are compelled to pay up to P110,000 to secure accreditations from two government agencies to get tax deductions as donee institutions.
This was pointed out by Department of Justice (DOJ) Secretary Jesus Crispin C. Remulla in his Jan. 10, 2024 legal opinion sought by Department of Social Welfare and Development (DSWD) Secretary Rex Gatchalian.
Gatchalian sought the legal opinion after receiving several complaints from SWDAs for being required to secure accreditation from both the DSWD and the Philippine Council for Non-Government Organization Certification (PCNC) to be recognized by the Bureau of Internal Revenue (BIR) as donee institutions and get tax deductions.
Remulla learned from Gatchalian, who believes that DSWD has exclusive function to accredit social welfare institutions, that “SWDAs expressed concern on the fees that they are required to pay for accreditation: P1,000 processing fee paid to DSWD, and from P10,000 to P90,000 application fee plus P2,000 to P10,000 annual membership fee to PCNC.”
“They claim that these substantial amount of fees could have been allocated toward the causes supported by these SWDAs,” Remulla noted in the legal opinion.
Remulla explained that Executive Order No. 720, series of 2008, has been clear in designating PCNC in accrediting entities for the purpose tax deductions under Republic Act (RA) 8424, the Tax Reform Act of 1997.
“The SWDAs may opt not to seek accreditation from PCNC as donee institutions, the consequence being that they cannot claim deductions for contributions or gifts made to them in their income calculations,” he said.
He pointed out that among the provisions of the EO: “No corporations, associations, or NGOs however shall be processed for accreditation by the PCNC unless it has secured a valid registration with the government agency that exercises regulatory function over such corporation, association or NGO.”
He said that the EO also provides: “The PCNC shall also be guided by the standards and guidelines of other government departments or agencies exercising regulatory functions over such corporations/NGOs, such as the Department of Social Welfare and Development (DSWD).”
“Clearly, the designation of PCNC as an accrediting entity is solely aimed at assessing the eligibility of corporations, associations or non-government organizations,” said Remulla.
He said that “PCNC’s role as an accrediting entity does not supersede the accreditation carried out by the government agency responsible for regulating these corporations, associations or NGOs.”
"PCNC is prohibited from processing accreditation for corporations, associations, or NGOs unless they have obtained valid registration from the government agency responsible for regulating them," he also said.
At the same time, Remulla said that RA 8424 defined a non-government organization as “a non-profit domestic corporation organized and operated exclusively for scientific, research, educational, character-building and youth and sports development, health, social welfare, cultural or charitable purposes, or a combination thereof, no part of the net income of which inures to the benefit of any private individual.”
“Consequently, social welfare institutions fall within the scope of ‘NGOs’, the term used in Section 2 of EO No. 720,” he also said.