Starting a Non-Profit Organization in the Philippines: Legal Requirements

Disclaimer: The information provided in this article is for general informational purposes only and is not intended as legal advice. For specific concerns and the most up-to-date regulations, consult a qualified lawyer or official government sources.

1. Overview of Non-Profit Organizations in the Philippines

In the Philippines, “non-profit organization” (NPO) is a broad term that covers entities organized primarily for charitable, educational, cultural, religious, social welfare, or other humanitarian purposes rather than profit. The most common legal form of a non-profit in the Philippines is a non-stock, non-profit corporation registered under the Revised Corporation Code of the Philippines (Republic Act No. 11232, which took effect in 2019).

Other possible forms of non-profit entities include:

Foundations (usually structured as non-stock corporations with special requirements)
Associations (formal or informal; if formal, typically also registered with the Securities and Exchange Commission, or SEC)
Cooperatives (registered under the Cooperative Development Authority but serve a different function than typical charities)

This article focuses on non-stock, non-profit corporations, as these are the most common and recognizable structure for charities, religious groups, educational institutions, and other philanthropic or service-oriented organizations.

2. Key Legal Framework

Revised Corporation Code (RA 11232)
- Governs the incorporation, organization, and regulation of all corporations in the Philippines, including non-stock, non-profit corporations.
- Retains many traditional rules from the old Corporation Code but introduced flexibility and new compliance measures.
Securities and Exchange Commission (SEC)
- The primary regulator for the registration and supervision of corporations.
- Issues guidelines for registration (including documentary requirements) and compliance (e.g., annual reports, General Information Sheets, audited financial statements).
Bureau of Internal Revenue (BIR)
- Oversees tax registration, issuance of Certificates of Tax Exemption (if applicable), and other tax-related matters (e.g., donor’s tax, income tax exemption).
Local Government Units (LGUs)
- Require business or mayor’s permits and other clearances for operating an office or conducting activities within their jurisdiction.
- Enforce local ordinances on building use, environmental compliance, and other municipal regulations.
Other Government Agencies
- Department of Social Welfare and Development (DSWD) for certain social welfare agencies or organizations providing direct services to specific disadvantaged groups.
- Department of Labor and Employment (DOLE) for labor standards if the NPO hires employees.
- Cooperative Development Authority (CDA) if registering as a cooperative.

3. Steps to Establish a Non-Profit Organization

3.1 Define the Mission and Purpose

Before beginning the formal process, clearly articulate:

The mission or purpose of your organization (e.g., charitable, educational, religious, social welfare).
The target beneficiaries or the segment of society you aim to serve.
How the organization’s activities will be funded (e.g., donations, grants, membership fees).

A clearly defined mission helps determine the appropriate legal structure and sets the groundwork for drafting organizational documents.

3.2 Choose the Appropriate Legal Structure

In the Philippines, most non-profits take the form of a non-stock, non-profit corporation. Under the Revised Corporation Code:

Non-stock corporations cannot declare dividends to members; any income or surplus must be used to further the organization’s purposes.
The law mandates at least five (5) trustees but no more than fifteen (15), all of whom must be of legal age.
A one-person corporation structure is not allowed for non-stock, non-profit entities; that structure is exclusive to stock corporations.

3.3 Draft the Articles of Incorporation and By-Laws

Two principal documents are required to register with the SEC:

Articles of Incorporation – Must include:
- The proposed name of the organization (ensure it is not identical or confusingly similar to an existing entity).
- Specific purpose(s) of the corporation.
- Principal place of business.
- Term of existence (can be perpetual under the Revised Corporation Code).
- Names, nationalities, and residences of the incorporators (the individuals starting the corporation).
- Number and names of the members of the Board of Trustees.
- A statement confirming that the corporation is non-stock and that any income will not be distributed as dividends but used for the purpose stated.
By-Laws – Must cover:
- Rules governing membership categories (if any).
- The appointment/election of trustees and officers.
- The manner of calling board meetings and member meetings.
- The roles, responsibilities, and powers of officers and trustees.
- The procedure for amending the by-laws.
- Other internal governance measures (e.g., dispute resolution, financial reporting).

Tip: Ensure compliance with the SEC’s sample formats or guidelines to avoid delays. The SEC often publishes templates and checklists on its official website.

3.4 Verify the Availability of Proposed Name

Before filing formal documents, you can check name availability:

Through the SEC’s Name Verification System or by visiting an SEC office.
Choose a name that reflects your organization’s objectives and does not infringe on existing trademarks or trade names.

3.5 Secure Other Preliminary Clearances (If Necessary)

Depending on your organization’s specific focus, you may need to obtain clearances or endorsements from other government agencies. For example:

If you will engage in social welfare programs or run a shelter, the DSWD may require accreditation.
If you will operate as a school, you may need permits from the Department of Education (DepEd) or Commission on Higher Education (CHED).

3.6 Filing with the SEC

Once the documents are ready, you can file them with the SEC. The main steps include:

Submit the Articles of Incorporation and By-Laws (in the required number of copies), along with the required notarization and documentary stamps.
Pay the necessary filing fees. Fees vary based on the amount of contribution or assets indicated in the Articles of Incorporation.
Obtain the Certificate of Incorporation from the SEC once all documentary requirements have been approved.

The approval timeline varies but usually takes a few weeks, assuming proper documentation and no major issues in the filing.

4. Post-Incorporation Requirements

4.1 Register with the Bureau of Internal Revenue (BIR)

After receiving the SEC Certificate of Incorporation, you must register your non-profit with the BIR for tax compliance purposes. This entails:

Obtaining a Tax Identification Number (TIN) for the corporation.
Paying the annual registration fee (if applicable).
Applying for authority to print official receipts (if your organization will issue receipts for donations or services).
Maintaining books of accounts (manual or computerized).
Securing a Certificate of Tax Exemption, if eligible.

Tax Exemption

Under Philippine law, non-stock, non-profit corporations organized exclusively for charitable, religious, educational, or scientific purposes may be exempt from income tax on their proceeds used for these purposes.
You must apply for a Certificate of Tax Exemption with the BIR, typically accompanied by documents showing that the organization is indeed operating as a non-profit and no part of its net income benefits any private individual.

4.2 Obtain Local Government Permits

Even if you are a non-profit, most local government units will require you to secure certain permits:

Mayor’s Permit or Business Permit (despite the “non-profit” status, the LGU might still impose a minimal fee for regulatory purposes).
Barangay Clearance from the barangay where you maintain an office.
Other local clearances as required by city or municipal ordinances.

5. Governance and Compliance

5.1 Board of Trustees

A non-stock corporation must have at least five (5) but no more than fifteen (15) trustees.
The Board is responsible for overall policy direction, financial oversight, and compliance with statutory requirements.
Trustees generally serve for a term specified in the By-Laws (often 1-3 years).

5.2 Officers

Typical officer positions include:

President (or Chairperson)
Corporate Secretary
Treasurer
Other officers as defined in the By-Laws (e.g., Vice President, Auditor, Executive Director)

Each has specific duties and liabilities under the Revised Corporation Code and internal organizational policies.

5.3 Reporting Obligations

General Information Sheet (GIS): Must be filed annually with the SEC detailing the names of trustees, officers, and other corporate information.
Audited Financial Statements (AFS): Must be submitted annually to the SEC (and to the BIR for tax purposes), typically prepared by an independent Certified Public Accountant.
Other Special Reports: The SEC or BIR may require disclosures on donations received, specific project funding, or changes in the Articles of Incorporation/By-Laws.

Failure to comply with reporting obligations can lead to penalties or potential revocation of the Certificate of Incorporation.

6. Fundraising and Donations

6.1 Solicitation Permit

If you plan to solicit donations from the public, you may need a solicitation permit from the DSWD (for national fundraising) or from the appropriate LGU offices (for local fundraising). The permit ensures the public that the organization is legitimate and that funds will be used for the stated charitable purpose.

6.2 Donor Incentives

Donations to certain qualified non-profit organizations may be deductible against the donor’s taxable income, subject to Bureau of Internal Revenue regulations.
Organizations seeking this benefit must secure a donee institution status from the BIR to ensure donations are tax-deductible for donors, if they meet the criteria (e.g., accredited charitable institutions).

7. Special Considerations

7.1 Anti-Money Laundering Act (AMLA)

Non-profits can be vulnerable to misuse for money laundering or terrorist financing. The Philippines’ AMLA and related regulations may require certain NPOs to maintain accurate records of donations, disclose major donors, and report suspicious transactions.

7.2 Employment and Labor Laws

If your organization has employees, comply with:

DOLE regulations on wages, working conditions, and social benefits (SSS, PhilHealth, Pag-IBIG).
Proper remittance of withholding taxes, SSS/PhilHealth/Pag-IBIG contributions, and annual tax returns.

7.3 Intellectual Property Rights

If your organization has a unique logo, motto, or brand name, consider protecting it through the Intellectual Property Office (IPO) of the Philippines.

7.4 Data Privacy

If you collect personal data, you must abide by the Data Privacy Act of 2012 (RA 10173) and its implementing rules—especially if you handle sensitive information about beneficiaries or donors.

8. Dissolution and Liquidation

Should the organization decide to cease operations:

Voluntary Dissolution: Requires a board resolution, notice to members, and SEC approval.
Liquidation of Assets: Under Philippine law and the Articles of Incorporation or By-Laws, remaining assets after settling liabilities must be distributed to another non-profit with a similar purpose or to the government. Assets cannot be distributed among members.

9. Practical Tips for Success

Engage Professionals Early
- Consider hiring or consulting with a lawyer and/or accountant familiar with non-profit law to ensure compliance from the start.
Keep Excellent Records
- Maintain a robust record-keeping system for financial transactions, board decisions, and membership data.
Stay Current with Legal Updates
- Non-profit regulations can evolve. Monitor SEC memorandum circulars, BIR issuances, and local ordinances.
Plan for Sustainability
- Develop strategies for fundraising, grant application, and volunteer engagement to maintain operations.
Establish Clear Internal Policies
- Good governance, conflict-of-interest policies, and transparency build trust with donors, beneficiaries, and regulators.

10. Conclusion

Establishing a non-profit organization in the Philippines involves careful planning, drafting compliant documents, and meeting regulatory requirements set by the SEC, BIR, and other government agencies. While the process can be rigorous, proper registration, governance, and ongoing compliance not only protect your organization legally but also establish credibility and trust among potential donors, beneficiaries, and the public. By understanding and adhering to the legal framework, your non-profit can effectively pursue its charitable mission and make a lasting, positive impact on Filipino communities.