RMC No. 124-2016: Circularizes the implementing Rules and Regulations of Republic Act No. 10693 otherwise known as the “Microfinance NGOs Act”

Summary

RMC No. 124-2016 circularizes the Implementing Rules and Regulations (IRR) of Republic Act No. 10693, the “Microfinance NGOs Act”.

Key points

1. Accreditation. The Microfinance NGO Regulatory Council accredits only Microfinance NGOs whose primary purpose is a microenterprise development strategy with microfinance programs, products and services for the poor. The NGO must provide the Basic Minimum Core Programs and Services under the Act and must have operated for at least three (3) consecutive years. It files its BIR Certificate of Registration with the Council, with the other IRR requirements.
2. Validity and renewal. The Certificate of Accreditation is valid for three (3) years from issuance, unless earlier revoked. Three (3) months before it expires, the NGO may renew it for the next three (3) years, using the same process as the initial application.
3. 2% tax. A registered and accredited Microfinance NGO pays two percent (2%) tax on gross receipts from microfinance operations in lieu of all national taxes. It applies only to NGOs whose primary purpose is microfinance and only to operations serving the poor and low-income individuals. The Certificate of Accreditation is required for the rate.
4. Income covered by the 2% rate. The rate covers only lending activities and insurance commissions bundled with and integral to the qualified lending. All other income is subject to applicable taxes.
5. TIN and books. Registered and accredited Microfinance NGOs and their clients must have a Taxpayer Identification Number (TIN) within a reasonable time set by the Council. Each NGO keeps books of accounts as required, with separate books for any other business it engages in.
6. Audited financial statements. The NGO publishes and discloses its Audited Financial Statements within one hundred twenty (120) days from the end of its financial year. Posting on its own or its alliance’s website suffices, and posting in public markets where clients are located may suffice for small NGOs.

Who is affected

• Microfinance NGOs and their clients

Deadlines and effectivity

• Accreditation valid for three (3) years from issuance
• Renewal: three (3) months before expiration
• Audited Financial Statements: within one hundred twenty (120) days from end of financial year

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.