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As featured on PhilStar:  A gratuitous service merits a gratuitous grant


The legal system has an impact on practically to every element of our society. The law is meant to protect the people. Lawyers, as defined in Revenue Regulations (RR) No. 12-2022, refer to individuals duly licensed by the Supreme Court to practice law in the Philippines and in good standing as of the date of rendering the required legal services. They serve as the system's pillar, connecting it to society in a variety of ways. They hold positions of great responsibility and must conform to a strict code of ethics.

In February 2009, the Supreme Court issued Bar Matter (B.M.) No. 2012 or "The Rule on Mandatory Legal Aid Service" which governs the mandatory requirement for practicing lawyers to provide free legal aid services in civil, criminal, or administrative cases. Such Rule was then further developed by Administrative Matter (A.M.) No. 17-03-09-SC requires covered lawyers to render 120 hours of pro bono legal aid services to qualified litigants. Such feature, though may be seen by others as involuntary servitude, is rather more of a manifestation that the legal profession is one imbued with a sense of public service. A lawyer, having taken the oath, assumes that their personal interests come only second to the valid interest of the State - the administration of justice.

That being said, by virtue of the Parens Patriae principle, the State assures the indigent and powerless to be afforded sufficient and adequate legal protection. However, it should also seek to be more considerate of its lawyers, who, still being normal citizens, rely upon their profession for bread and butter.

Hence, by likewise appealing to gratitude, Republic Act (R.A.) No. 9999, otherwise known as the “Free Legal Assistance Act of 2010”, was approved as law. The Act aims to provide free legal assistance to the poor in accordance with the State’s policy to guarantee said legal assistance and ensure that every person who cannot afford the services of a counsel is provided with competent and independent counsel preferably of his/her own choice. The Act also provides tax incentives to lawyers or professional partnerships rendering actual free Legal Services. They shall be entitled to an allowable deduction from the gross income equivalent to the lower of:

a.    the amount that could have been collected for the actual free Legal Services rendered; or

b.    ten percent (10%) of the gross income derived from the actual performance of the legal profession.

The actual free Legal Services to be rendered shall be exclusive of the minimum sixty (60)-hour mandatory legal aid services rendered to indigent litigants as required under the Rule on Mandatory Legal Aid Services for Practicing Lawyers, under B.M. No. 2012, issued by the Supreme Court.

In relation to this, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 12-2022 prescribing more definitive guidelines, procedures, and requirements for the proper availing of the incentives under RA No. 9999.

To be entitled to the incentives, the Legal Services to be provided must be within the scope of the services defined by the Supreme Court in B.M. No. 2012 and subsequent issuances. The free Legal Services shall refer to appearing in court or a quasi-judicial body for and on behalf of an indigent or pauper litigant, preparing pleadings or motions, and assisting in court-annexed mediation and in other modes of alternative dispute resolution (ADR), including being appointed as counsel de officio.

Lawyers or professional partnerships availing the incentives shall attach to their income tax return (ITR) for the period when the deduction was claimed the following documents:

a.    Certification, specifying the number of hours actually provided in the provision of the Legal Services, from the Public Attorney's Office (PAO), the Department of Justice (DOJ), or accredited association of the Supreme Court indicating that:

 i.        the legal services to be provided are within the services defined by the Supreme Court;

ii.        the agencies cannot provide the Legal Services to be provided by the private counsel; and

iii.        the Legal Services were actually undertaken.

b.    Accomplished BIR Form No. 1701 for individual lawyers or BIR Form No. 1702-EX for general professional partnerships, particularly schedules 5 and 2, respectively, on “Special Allowable Itemized Deductions,”

c.     Sworn Statement of the lawyer or managing partner as to the amount that could have been collected for the actual free legal service.

The incentive does not, in any way, seek to frame lawyers in the purview that they should be given tax deductions in order to boost their morale in accepting pro bono cases. The intent of the tax deduction is not compensation but rather a manifestation of gratitude by the government for the selfless service of lawyers who took an oath to take a substantial part in the interests of the public. The reason as to why this tax deduction could not be seen in the light of compensation would be defeating the very purpose of a lawyer. It is an affront to the core of a lawyer's existence, which is to serve the valid state interests of the public, both for the affluent and the impoverished.

In that regard, lawyers, though their primary motivation is to serve the public, receive, incidentally, an additional benefit in the form of a tax deduction for their services.

Jamaica M. Dayag
KPMG in the Philippines

Jamaica M. Dayag is an Analyst from the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as Tier 1 in Transfer Pricing Practice and General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Tax Analyst Jamaica M. Dayag or Tax Partner Leandro Ben M. Robediso through ph-kpmgmla@kpmg.com, social media, or visit www.home.kpmg/ph.

This article is for general information purposes only and should not be considered professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.