Business Consulting BlogBusiness RegistrationNon-Stock, Non-Profit Organization vs Foundation in the Philippines

June 24, 2022
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As one of the countries with slow economic development, high unemployment rates, and escalating birth rates, the Philippines has remained in the third-world country category. However, the beauty of the country, the resiliency, and the positive outlook of the average Filipino have inspired numerous local and foreign citizens to give back to the Philippines. 

Some supporters have expressed interest in building houses for the homeless, while some want to collect scholarship funds for children. Others may want to do voluntary services or good deeds for the citizens. 

Those who wish to extend help for the long term should first start a non-profit organization or a foundation that focuses on performing charitable acts in the Philippines. 

Under the Philippine law, if you want to create an organization to extend help, you can establish a non-profit company. Under this category, you can create a foundation or a non-stock non-profit company. A non-stock non-profit company can benefit from income tax exemption under Section 30 of the Tax Code provided that it meets certain conditions.

For a non-profit company to be tax-exempt, it should:

  1. Establish that its income or properties do not profit any of its representatives;
  2. Should not run to cater to the personal interests of certain people such as the founders of the company; and
  3. Should cater to a public and not a private goal, specifically charitable, civic service, cultural, educational, fraternal, literary, professional, religious, scientific, social, or related goals, such as agricultural, trade, industry, and comparable departments or a mix of those mentioned. 

Let’s take a look at the differences between a foundation and a non-stock non-profit organization below:

Foundation

Non-Stock Non-Profit Organization

  • According to the Securities and Exchange Commission (SEC), a foundation is a non-stock, non-profit corporation organized to spread allowances and contributions to fund its objectives and to boost resources to achieve athletic, charitable, cultural, educational, literary, scientific, social welfare religious, or other related goals. 
  • A foundation needs to meet specific capital requirements, secure local permits, provide Articles of Incorporation, and be registered with the Bureau of Internal Revenue (BIR),  Securities and Exchange Commission (SEC), and the Philippine Council for NGO Certification. 
  • Usually, funding for foundations comes from a family or a corporate entity, whereas money for non-profit companies comes from their revenues. 
  • Foundations may be classified into a private non-operating and a private operating foundation(s). A private non-operating foundation grants money to other charitable organizations, while a private operating foundation allocates its funds to its own programs with philanthropic goals. 
  • A non-profit organization takes all the profits from the donations, goods, services, or sponsorships it receives and uses it to fund the organization’s mission.
  • An accredited non-stock, non-profit organization should be operated for either one or more of the following goals: athletic, charitable, cultural, religious, rehabilitation of veterans, scientific, and social welfare. 
  • An accredited non-government organization (NGO) must be created for the following purposes: character-building, charitable, cultural, educational, health, social welfare, and youth and sports development.
  • No net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution’s purpose and all activities, not for profit.
  • No part of its income is distributable as dividends to its members, trustees, or officers.

 

  Non-Profit

  Foundation

  Where

 Funds Come From

  Obtained from government agencies, foundations, individual contributions and others   Secured from the founders
  Grants   Do not create grants for other non-profit organizations   Create grants to other charities
  Employee Compensation   Most workers are volunteers and do not get paid   Workers get paid regular wages
  Challenges   Relies on other foundations for funds   Acquire funds from founders
  Board  Managed by a board of members for direction  Managed primarily by its donors

Advantages of a Non-Stock Non-Profit Organization over a Foundation

Both types of non-profit government have their own merits. However, after careful research, we have found Non-Profit Organizations (NPOs) to be the more beneficial choice of the two. Below are some of the advantages of creating an NPO:

  • No minimum contribution is necessary for registration with non-stock, non-profit organizations (NPOs). In comparison, foundations require a minimum initial capital of One Million Pesos (P1,000,000.00). The bank deposited capital will be evidenced with a Notarized Certificate of Bank Deposit issued by the same bank.
  • NPOs are more flexible regarding the source of funds, while foundations are funded chiefly by their founders. 
  • NPOs are not required to indicate “non-profit organization” in their corporate name, unlike foundations where the word “foundation” is required to appear in its corporate name. 
  • A non-profit exists as its own legal entity and therefore holds its mission above the interests of individual founders/members (incorporation)
  • Donors of non-stock non-profit organizations enjoy one hundred percent (100%) deductible expenses and thirty percent (30%) tax exemption. 

Need help in starting a Non-Profit Organization? 

If you need help starting up a non-profit organization and registration with the BIR, SEC, and the Philippine Council for NGO Certification, please Contact Us for assistance. With over 20 non-profit organizations registered in the Philippines and as the first ISO 9001:2008 company in the country to offer business registration services to its clients, Triple i Consulting is armed with a team of Philippine business strategy experts who can provide professional help in the establishment of a non-profit organization. 

You may fill out the form below to book a free 30-minute consultation with our Non-Profit Organization experts, call us at +63 (02) 8540-9623, or email us at info@tripleiconsulting.com

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