Introduction: Why People Tithe?
There is a difference to Tithes and Offerings — Tithe is 10% of the income while Offerings are anything you give beyond the 10% which is from the bottom of your heart. In Proverbs 3:9 (NIV), “Honor the Lord with your wealth, with the firstfruits of all your crops.” In the Bible, the Lord said that a tenth of your harvest is the Lord’s and is holy. The word Tithe means “Tenth” in Hebrew, which makes such donations apt:
“A tenth of the produce of the land, whether grain or fruit, is the Lord’s, and is holy.” — Leviticus 27:30 (TLB)
Because of our beliefs, the company I am employed in tithe an estimated 10% of our income to God. We run an estimate on what the 10% of our income should be, and at the end of the month, we donate 10% of the income to our local church in exchange for an Official Receipt.
The church, along with many local churches, had been vocal about tithing as a good spiritual practice. Base-case, all the churches I had been to has gone as far as to say that all donation to God is tax deductible.
Here is the problem — When a church claims that your donations to their organization is tax deductible, many people believe that the donations they give is WHOLLY tax deductible. As I will share with you my friends, this belief is apparently WRONG.
I just discovered last week that the church the company was tithing to did not have a Certificate of Donee. This fact was only discovered after my Father-in-Law was audited by the BIR. After seeing how his company has been tithing and deducting the amount as an expense as evidenced by an Official Receipt, BIR asked to see the church’s Certificate of Donee.
Here was the surprising discovery — Despite their long standing history, respectable reputation of being a church who gives much to ministry, and a huge number of followers, the church has never renewed their Certificate of Donee when it expired 10 years ago during Kim Henares’ time.
“What happened?” I asked, “Why did they not renew their Certificate of Donee then?”
When I made a few other queries, I discovered that almost all of the the big mega-churches my friends and I were donating to did not even have a Certificate of Donee! Hence, donations to the church is not wholly tax deductible. In fact, the amount of tax you can deduct by donating to these churches are insultingly small.
I felt a bit stupid and mislead.
It is the same as a man who tells you while courting you, I am loyal to you and will not cheat on you. Later on after you guys married and had kids, you caught him in an act with another woman. Enraged, you ask me, “I thought you said you were loyal and you will not cheat on me?”
The man will then tell you, “Yes, I am loyal. But I am just not WHOLLY loyal.”
It is the same way with donations and churches. In general, gifts to strangers (e.g., someone who is not related to you up to the 4th degree) are subject to 30% donor’s tax. While it may be true that donations to churches may be tax deductible, they are NOT WHOLLY tax deductible unless the organization has managed to acquire a Donee Certificate, which is a BIR requirement before all your donations to that organization FULLY tax deductible.
Only donations to organizations duly accredited by the Philippine Council for Non-Government Organizations (NGO) Certification, Inc. (PCNC) are FULLY tax deductible. If your organization is not accredited, the tax deduction to a Non-Accredited church or NGO is actually super small. Way smaller than many of these organizations has led you to believe…
I. How Much Tax Can You Deduct if Your Church/NGO has a PCNC Certification? What if they Do NOT?
If your church or NGO is not accredited to PCNC, the tax deduction you can get is surprisingly small.
Deductions from non-accredited churches/NGOs can only deductible up to 5% of your taxable income AFTER allowed deductions but before donations.
See the explanation below by the Ombudsman (Source Here):
So imagine that you as a corporation would like to make a generous donation to help the poor, lost and needy. The church then excitedly informs you that they can provide an Official Receipt and your donation can be deductible from taxes. With such knowledge and goodwill, the company makes a sizeable donation. While goodwill and charity are the primary factors, the company and their employees feel good knowing they can expense it as well.
To your surprise, BIR informs you at their audit AFTER the donation was made that your donation is apparently not wholly tax deductible since the organization you donated to are not accredited by PCNC and/or do not have a Certificate of Donee. The corporate taxpayer now have a huge Php 380,000 problem:
Instead of you being able to expense Php 400,000 to a non-accredited charity organization, you can apparently only deduct Php 20,000. You however reported a Taxable income of Php 230,000 as per the table above, and had paid tax on Php 230,000, thinking your donation can be fully expensed. BIR now tells you that income tax you paid was wrong, you cheated (knowingly or not) on reporting your taxable income.
BIR then forces you to pay tax on your Php 610,000 total taxable income (Computation: Php 230,000 original taxable income + Php 380,000 donation to the NGO you cannot expense), and not the Php 230,000 you originally reported. There are also some penalties related to the mispayment.
Naku po! Nagdonate ka na sa NGO, nadagdagan pa ang taxes na kailangan mong bayaran sa gobyerno dahil wala silang Certificate of Donee.
II. Does your Church or the NGO you Donate to Have a Certificate of Donee?
Now we know — In the Philippines, donating to a Church or an NGO DO NOT automatically earn you a full tax deduction UNLESS such organization is duly accredited by the Philippine Council for Non-Government Organizations (NGO) Certification, Inc. (PCNC).
Let me repeat that — Only donations to organizations accredited by PCNC are fully tax deductible. Everything else is NOT.
This is why it is very important, my friends, to check if your organization is accredited by PCNC here — Search Results for “” – PCNC. You would feel safer knowing that your organization is truly spending the money you donate to the right hands if the organization is PCNC accredited.
To date, there are only 495 organizations that are PCNC certified, as follows:
Here is a more detailed breakdown as of January 2021:
To make it easier, here are some of those on the list. Interestingly, many are educational institutions and large companies. Very very few are Christian churches, except for Christ Christian Fellowship Ministries (CCF). A lot of companies have set up foundations of their own, maybe at their cynicism to see how “charitable” organizations were using the money uncharitably. Please note that this is NOT the complete list. The complete list is Search Results for “” – PCNC. But these are some of the more interesting names I saw on the list:
Please note that only the organizations from the list are exempted from donor’s tax, provided that the donor complies with certain conditions prescribed under the existing law and other relevant issuances. Gifts made to or for the use of the national government may also be exempted from donor’s tax.
To make it easy for Christians, I can verify that Christ Christian Fellowship is PCNC accredited. However, most other Christian churches are not. The question is WHY NOT?
III. So Why is It Important for the Charity/NGO you Donate to Have a Certificate of Donee or Accredited by PCNC?
The Philippine Council for Non-Government Organizations Certification (PCNC) is a seal of good housekeeping for many NGOs. Many organizations po kasi use the status of an NGO or a charitable organization to escape from taxes, do money laundering, or pocket the money for personal use. We have heard so many organizations who get donations, help businesses escape tax, but use the money not for charity for their own personal gain.PCNC was made to certify and double check that the organizations we are donating to practice good governance, management and accountability. As per their mandate from the Department of Finance in 1998, a PCNC certification also serves as a basis of the Bureau of Internal Revenue (BIR) to approve applications for donee status of an NGO. Donors of NGOs with the certificate of donee status from BIR are then exempted from paying donors’ tax and said donations are deductible from the taxable income of the donor.
Please note that 23-year old PCNC is NOT a government agency. PCNC was organized in 1997 by six (6) of the largest NGO networks in the country. It is an answer to the challenge in 1995 from the Department of Finance to the NGO community to set up a self-regulatory body that will complement the effort of BIR in ensuring that only legitimate NGOs that are practitioners of good housekeeping receive donee status. Today, PCNC has evolved to be more than a self-regulating body. It helps NGOs improve their reach, capability and effectiveness.
In short, if walang tataguin or gagawing masama ang NGO/charity, and if they are able to spend the money correctly, they should not have too much of a hassle to get a PCNC certification. Pero if may discrepancy or hanky panky, mahirap talaga makakuha ng accreditation.
I’m sorry if we just want to ask if your organization is PCNC accredited. Because the last I heard, a PCNC accreditation means that your organization gives 70% of the donations to charity, and only 30% for admin fee. Can you blame me for asking where the donations went and if it went to good hands?
IV. Why Do Many Organizations Do Not Possess a PCNC Certification?
Actually, there is very little excuse. Either walang time, walang marunong, or sobrang hassle, an organization must still try to get a certification to prove their good standing.
Still, many excuse their lack of PCNC Certification or Donee Certificate by saying:
a. Ex BIR Commissioner Kim Henares did not renew many expired applications due to blatant abuse. So they decided to wait for the next change of guard to apply.
After seeing how many companies abused donations to churches in an effort to minimize taxes, Kim Henares allegedly stopped renewing many of the Certificate of Donees that expired. These Certificate of Donees expire on a 1-, 3- and 5-year basis depending on the organization, and Henares allegedly gave many churches a hard time renewing, many of these churches decided to let their Certificates lapse and just wait for the next political change to happen.
While this reasoning might be true, it is a misleading truth. Actually Former BIR Commissioner Kim Jacinto Henares has already retired last June 2016, almost 4 years ago. Still, many churches still failed to do their part to renew their Donee Certification. So excuse lang pala si Kim Henares.
b. We are a church/charity organization. Our target is to help the poor/needy. It is not our job to undergo red tape and bureaucracy just to get a stupid accreditation.
A large Chinese Christian church in Manila shamed my mom when she asked for a Donee Certificate. They literally told her, “Our church do not have this Donee Certificate. It is a long process to secure with the SEC” so apparently, they never did bother anymore.
They then quipped that the Bible said that man has to give 10% of their earnings to the church because it is God’s money. Hence, given this is God’s orders, my mom should not question why they do not have this certification, as to give is to give wholeheartedly and not for the purpose of having your donations deductible in tax.
Here is the issue — Whereas tithe may have been ordered by God, Christian Stewardship is also a concept churches should be very familiar with.
Especially when your church has hundreds or maybe thousands of members, it is up to the church to also ensure that they fully comply with the government requirements and pay the government tax necessary in operating the church. Does the church annually submit their GIS to the SEC? Are the church truly paying the correct taxes since they are not necessarily a registered NGO/church/charitable organization by the government? Are they ensuring that their members are paying the correct taxes by issuing Official Receipts, but never claiming that members can only deduct 5% MAX of their taxable income post deductions, instead of leading people to think they can deduct 100% if they can give more?
In Mark 12:15-22 and Mark 12:13-17, the Bible shares with us the story of Jesus, the Pharisees and Caesar’s Coin:
They anticipated that Jesus would oppose the tax, as their purpose was “to hand him over to the power and authority of the governor”.[Luke 20:20] The governor was Pilate, the man responsible for the collecting of taxes in Roman Judea. Initially the questioners flattered Jesus by praising his integrity, impartiality, and devotion to truth. Then they asked him whether or not it is right for Jews to pay the taxes demanded by Caesar. In the Gospel of Mark[12:15] the additional, provocative question is asked, “Should we pay or shouldn’t we?”
Jesus first called them hypocrites, and then asked one of them to produce a Roman coin that would be suitable for paying Caesar’s tax. One of them showed him a Roman coin, and he asked them whose head and inscription were on it. They answered, “Caesar’s,” and he responded: “Render therefore unto Caesar the things which are Caesar’s; and unto God the things that are God’s”.
Christian Stewardship refers to the responsibility that Christians have in maintaining and using wisely the gifts that God has bestowed. Church Leaders should practice good Christian Stewardship by ensuring that money that the members give to God goes to God and fully God’s works. Money for ministry should go to missionaries, and money for charity goes to the poor.
However, how many churches have bestowed riches towards its pastors, elders and selected members?
Here are some of The Shocking Net Worth of These 10 Richest Pastors Will Blow Your Mind (cheatsheet.com). How many of you know of church pastors who buy the best and most expensive sneakers, purchase and travel via private plane, and buy the fastest most expensive cars.
c. There are too much paperwork. Pinapahirapan kami. So we decided to forgo the certification.
Look, many of the documents required by the PCNC form applicants are actually regulatory AND reportorial requirements of the Bureau of Internal Revenue (BIR) and the Securities and Exchange Commission (SEC) which NGOs must religiously comply with anyway. If you are for example an NGO or charitable organization, and you are doing your job correctly, while it may be mabusisi, it should not be wholly difficult to get the documentation required.
The only time it is difficult to arrange the documentation is if you cannot comply with the standards required by PCNC to be accredited. Are you sure that your organization is run correctly? Are you sure the money you receive for donations actually are spent on charity? Are you sure that the organization is really a charitable organization, or is it used for personal gain?
I have personally double checked the requirements on how to get a PCNC Certification and can verify that organizations who are not really operating as a charity would find it difficult to get a PCNC Certification. However, if you are operating well, it should not be too much of an issue kasi dapat mo naman talaga gawin yung hinihingi ng PCNC.
If you are a legit NGO, church or charitable organization, most of the documents required for when applying for PCNC certification will not be difficult to produce. If you are working with a government agency (e.g., DWSD, DepEd, CHED, DOST, etc.), if you are truly doing the work intended, it would not be as difficult to get certification from the government agency that has purview over the type of programs implemented (by the NGO).
V. How Can You Avail of a PCNC Certification?
An organization who wishes to avail of a PCNC Certification, which is a requirement for the BIR to issue a Donee Certificate, can apply direct to the PCNC.
Here is what happens during a PCNC Application – PCNC:
- PCNC organizes the evaluation team that will visit the NGO. The evaluation team is composed of the following: a senior management staff of a PCNC certified organization; a CPA and a member of the Philippine Institute of Certified Public Accountants and; a PCNC certification associate.
- The team then conducts:
- interview/focus group discussion with members of the NGO Board of Trustees, management and rank and file personnel, beneficiaries and partners; review of documents that include minutes of Board meetings, original copies of documents submitted to PCNC, program monitoring and evaluation reports, accounting books and supporting documents, etc. and; field/project visits. All these evaluation activities are important in determining the degree to which an NGO complies with the standards of good governance, management and accountability.
- If there are no deficiencies in the documents and in the evaluation team’s findings, it takes approximately three (3) months from the time the application of an NGO is acknowledged by PCNC up to the approval of the application for certification.
- The PCNC certification is then endorsed to the BIR for the donee institution certification. BIR approval of donee institution status usually takes two (2) to three (3) months.
These are the documents the organization will prepare for the evaluation team to peruse during the visit. All these are pretty standard and should already be on hand to any running church or NGO:
VI. Final Words: The Devil is in the Details
I personally believe that any RESPONSIBLE charitable organization should be accredited with the Philippine Council for Non-Government Organizations Certification (PCNC). The non-government body does an awesome job in double checking that these organizations are truly following their righteous mandates and spending the money in the right place — 70% for the poor, needy and ministry. I sincerely believe that if their heart is in the right place and they are truly doing what is good, they should have a Certificate of Donee.
Again, to double check if your organization is accredited by PCNC, click here — Search Results for “” – PCNC. You would feel safer knowing that your organization is truly spending the money you donate to the right hands if the organization is PCNC accredited.
If a company is not accredited, I would suggest that you exercise with more caution before donating the money. For one, you have to be careful on how to deduct your donations as a tax expense, and two, there is a high likelihood that such organization is truly not as altruistic as you think, and the money is merely spent on running the organization such as the church van, new sound system and pastors’ salaries. Some can even buy a private plane via the use of donations/God’s money!
Here’s the real deal — A charitable organization is supposed to be the core of good. While they do enjoy some tax exemption, they should also fulfill their moral obligation to be registered and accredited if possible.
As per the BIR, all certified non-stock non-profit corporations/NGOs are required to issue a certificate of donation (BIR Form 2322) on every donation or gift they receive. Such certificate shall be accomplished by the said certified nonstock non-profit organization/NGO in triplicate and distributed within 30 days after the receipt of the donation. (Sec. 3, Rev. Regulation 13-98). Refusal to issue the Certificate of Donation can be a ground for revocation by the donor of the donation. Furthermore, such refusal being a violation of the provisions of the law warrants PCNC’s canceling the organization’s certification and revocation of the BIR’s Certificate of Registration.
If your church made you feel that everything is wholly tax deductible but apparently it was not, you may complain to the donee, and the donee is obliged to RETURN THE DONATION back to the corporate donor. Depending on the cause for the revocation, donor may also claim for damages. (Art. 764, New Civil Code of the Philippines)
It is the same with any other business refusing to provide you with a legit Official Receipt. Or forgetting to tell you that you can exchange the item if there are any factory damage. You must give to God what is for God, but you must also give to Caesar what is due to Caesar. How many NGOs, charitable organizations and churches are truly giving to Caesar what is due to Caesar?
Thanks my friends, and may you find wisdom in your gift giving and tax paying. Have a great weekend ahead!