How can you legally establish and operate a charitable foundation in the Philippines?
In the Philippines, setting up a charitable foundation requires compliance with various legal requirements to ensure proper operation and recognition by authorities. This guide outlines the key steps and considerations involved in establishing a foundation in the Philippines.
1. Legal Framework and Requirements
a. Registration with the Securities and Exchange Commission (SEC)
The first step in legally establishing a foundation is to register it with the SEC. The foundation must submit the following documents:
- Articles of Incorporation
- By-laws
- Treasurer’s Affidavit
- Joint affidavit of two incorporators undertaking to change the corporate name immediately upon receipt of notice from the SEC that another entity has acquired a prior right to use the name.
The Articles of Incorporation should include the foundation's name, purpose, principal office address, term of existence (which may be perpetual), names and addresses of incorporators, number of trustees (not less than five nor more than fifteen), and capital structure.
b. Minimum Capital Requirement
A foundation must have a minimum capital of PHP 1,000,000.00. This amount should be in the form of cash or property and is essential to demonstrate the foundation's capability to support its charitable purposes.
2. Tax Exemption and Donations
a. Bureau of Internal Revenue (BIR) Registration
After registering with the SEC, the foundation must secure a Tax Identification Number (TIN) and register with the BIR. The foundation should file for tax exemption under Section 30 of the National Internal Revenue Code, which covers non-stock, non-profit corporations organized and operated exclusively for charitable purposes.
b. Donations and Fundraising
Donations to foundations are generally deductible for donors if the foundation is accredited by the Philippine Council for NGO Certification (PCNC). The foundation must apply for accreditation and meet the standards set by PCNC to ensure transparency and proper utilization of funds.
3. Compliance and Reporting
a. Annual Reporting to the SEC
Foundations are required to submit annual reports to the SEC, including General Information Sheet (GIS) and Audited Financial Statements (AFS). This ensures that the foundation remains compliant with corporate governance standards.
b. BIR Requirements
The foundation must also submit an annual income tax return to the BIR, even if it is exempt from income tax. The foundation is required to withhold and remit taxes on compensation and benefits paid to employees and any other applicable taxes.
4. Governance and Management
a. Board of Trustees
The foundation should have a board of trustees responsible for overseeing its activities. The trustees should be individuals of good moral character and integrity. The board is responsible for setting policies, ensuring financial stability, and upholding the foundation’s mission.
b. Internal Controls and Audits
Implementing strong internal controls is essential to prevent fraud and misuse of funds. Regular audits, both internal and external, should be conducted to maintain financial integrity and transparency.
5. Ethical Considerations
a. Mission and Purpose
The foundation’s activities must align with its stated mission and purposes as outlined in its Articles of Incorporation. The primary objective should always be to serve the public interest and provide tangible benefits to the community.
b. Conflict of Interest
Trustees and officers must avoid conflicts of interest. Any potential conflicts should be disclosed, and affected individuals should recuse themselves from decision-making processes related to the conflict.
Conclusion
Establishing and operating a charitable foundation in the Philippines involves navigating a complex legal landscape. Compliance with registration, taxation, and governance requirements is crucial for the foundation’s success and credibility. By adhering to these legal standards, foundations can effectively pursue their philanthropic missions and contribute positively to society.