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How to Start a Foundation in the Philippines

September 22, 2016

Foundations in the Philippines serve as vital instruments for addressing social challenges, from poverty reduction to advancing education and healthcare. Establishing a foundation involves navigating a complex framework of legal, financial, and administrative requirements overseen by agencies such as the Securities and Exchange Commission (SEC), the Bureau of Internal Revenue (BIR), and the Department of Social Welfare and Development (DSWD). This comprehensive guide outlines the essential steps, regulatory obligations, and practical considerations for launching a foundation, ensuring compliance and long-term success. Whether you’re a local philanthropist or an overseas Filipino, this article provides a clear roadmap to create a charitable entity that delivers meaningful impact.

Defining the Foundation’s Mission and Structure

A clear mission and robust organizational structure are the foundation of any successful charitable entity. This initial step aligns your philanthropic vision with regulatory requirements and sets the stage for effective governance.

Establish the Purpose: Define the foundation’s objectives, such as supporting education, healthcare, or community development. Ensure the mission complies with the Revised Corporation Code of 2019, which governs non-stock corporations, including foundations.
Select a Foundation Structure: Foundations are non-stock, non-profit corporations, distinct for their endowment-based funding. Include “Foundation” in the name to meet SEC naming requirements.
Appoint Trustees: Form a board of 5 to 15 trustees to oversee governance and decision-making. Clearly define their roles to avoid conflicts of interest.
Develop Governance Policies: Create by-laws detailing board elections, meeting schedules, and operational guidelines to promote transparency and accountability.

Registering with the Securities and Exchange Commission (SEC)

SEC registration establishes the foundation’s legal status as a non-stock corporation. This process requires precise documentation and adherence to updated regulations under the Revised Corporation Code.

Reserve a Name: Use the SEC’s eSPARC portal to verify and reserve a unique name that includes “Foundation.”
Draft Articles of Incorporation: Prepare Articles of Incorporation outlining the foundation’s purpose, principal office address, trustee details, and capital contributions. Include a clause prohibiting profit distribution.
Submit By-Laws: Provide by-laws specifying governance rules, including board meetings, officer roles, and amendment procedures.
Deposit Minimum Capital: Place at least PHP 1,000,000 in a bank account and secure a Notarized Certificate of Bank Deposit to evidence the endowment.
File Required Documents: Submit the Articles, by-laws, name reservation, and bank certificate to the SEC via eSPARC or in person, paying applicable filing fees based on authorized capital.
Obtain SEC Certificate: Upon approval, the foundation will receive the SEC Certificate of Incorporation, which confirms its legal status.

Update: Many people are inquiring about how to start a foundation in the Philippines, but decide not to after discovering there is a P1,000,000 paid-up capital requirement. Instead, you may want to consider incorporating a Non-Stock Non-Profit Organization. You can read more about the differences between a foundation and a non-stock non-profit organization here. Also, you may contact us for an initial consultation to help you accomplish this.

Securing Tax Exemptions with the Bureau of Internal Revenue (BIR)

Tax exemptions enhance a foundation’s financial efficiency and attract donors by offering tax benefits. Registering with the BIR and obtaining qualified non-profit status involves a detailed process to ensure compliance.

Register with the BIR: Obtain a Tax Identification Number (TIN) at the Revenue District Office (RDO), where the foundation’s principal office is located, submitting SEC-approved Articles and by-laws.
Apply for Tax Exemption: File for tax exemption under Section 30 of the Tax Code, providing financial statements, SEC registration, and a detailed description of charitable activities.
Secure Qualified Non-Profit Status: Obtain BIR certification as a qualified non-profit, enabling donors to claim tax deductions. This requires accreditation from the Philippine Council for NGO Certification (PCNC).
File Annual Returns: Submit annual income tax returns, even if exempt, and withhold taxes on employee compensation to maintain compliance.
Maintain Financial Records: Keep accurate records, as the BIR may audit to verify that funds are used exclusively for charitable purposes.

Complying with Additional Regulatory Requirements

Beyond SEC and BIR registration, foundations may need to meet requirements from other agencies based on their activities. These steps ensure that the charitable entity operates legally and effectively.

Register with DSWD: Foundations involved in social welfare must register with the DSWD and submit SEC documents, program plans, and proof of financial capacity.
Obtain PCNC Accreditation: Apply for PCNC accreditation after two years of operation to secure qualified non-profit status. Provide audited financial statements and evidence of program implementation.
Secure Local Permits: Obtain a Mayor’s Permit from the local government unit (LGU) where the foundation operates, along with barangay clearance and other local requirements.
Obtain Sector-Specific Endorsements: For educational foundations, secure endorsements from the Department of Education (DepEd), Commission on Higher Education (CHED), or Technical Education and Skills Development Authority (TESDA), as needed.
Open a Corporate Bank Account: Establish a bank account using the SEC Certificate and BIR TIN to manage the endowment and donations.

Ensuring Ongoing Compliance and Transparency

Continuous compliance with regulatory bodies and a commitment to transparency strengthen a charitable entity’s credibility and sustainability. This involves regular reporting and adherence to governance standards.

Submit SEC Reports: File the General Information Sheet (GIS) and Audited Financial Statements (AFS) annually with the SEC. Foundations receiving government funds or donations above PHP 500,000 must also submit a sworn statement and Certificate of Existence of Program/Activity (COEP) per SEC Memorandum Circular No. 15-2016.
Conduct Annual Audits: Hire a certified public accountant to audit financial statements yearly, ensuring compliance with PCNC and BIR standards.
Adhere to PCNC Standards: Meet PCNC’s financial management and accountability requirements to maintain accreditation and donor trust.
Utilize Digital Tools: Leverage platforms like the SEC’s eSPARC and BIR’s eFPS for efficient filing and compliance monitoring.
Engage Stakeholders: Communicate regularly with donors, beneficiaries, and the public through reports and social media to build trust and demonstrate impact.

Navigating Challenges with Professional Assistance

Setting up and maintaining a foundation in the Philippines involves multiple agencies, intricate documentation, and ongoing compliance obligations. Professional guidance is essential to avoid errors and streamline operations. Triple i Consulting, a trusted business, and non-profit setup service provider, offers expert support to help you navigate these challenges. Our comprehensive assistance with SEC registration, BIR compliance, and PCNC accreditation ensures your charitable entity meets all legal and operational requirements, allowing you to focus on your mission. Visit our website to learn how we can guide you through this intricate process.

Expert SEC Support: Triple i Consulting assists with name reservation, document preparation, and SEC filing, ensuring compliance with the Revised Corporation Code.
BIR and Tax Expertise: Our team handles BIR registration and tax exemption applications, securing qualified non-profit status for maximum donor benefits.
DSWD and PCNC Guidance: We support registration with the DSWD and PCNC accreditation, ensuring eligibility for tax incentives.
Ongoing Compliance Assistance: Triple i Consulting manages SEC and BIR filings, audits, and local permits, reducing administrative burdens.
Strategic Planning: Our consultants provide tailored strategies for fundraising, governance, and transparency to enhance your foundation’s impact.

Wrapping Up

Launching a foundation in the Philippines is a powerful way to drive social change, but it demands careful planning, regulatory compliance, and strategic execution. By defining a clear mission, registering with the SEC and BIR, securing additional permits, and maintaining transparency, founders can establish a sustainable charitable entity that delivers lasting impact. The process, though complex, is achievable with expert guidance. Triple i Consulting is committed to supporting philanthropists in navigating these steps, ensuring a seamless setup and ongoing success. By following this guide, you can transform your vision into a thriving foundation that benefits communities across the Philippines.

Is Assistance Available?

Yes, Triple i Consulting offers expert services to simplify the complex process of starting a foundation. Contact us today to schedule an initial consultation with one of our experts: