A welcome news to lawyers and the public alike is the issuance of BIR Revenue Regulations No. 12-2022 which lays down the incentives for legal professionals who provide free legal assistance to members of our society who cannot afford quality legal service.
The BIR issued the said R.R. to implement the provisions of Republic Act 9999 or the Free Legal Assistance Act of 2010 which was approved on 23 February 2010. The said law was enacted in furtherance of the declared policy of the State to value the dignity of every human person and guarantee his/her right to free, competent, and independent legal counsel especially for those who cannot afford the same, to secure the ends of justice as well as to protect their interests.
Under the said RR, lawyers or professional partnerships who render actual free legal services are entitled to an allowable deduction from their gross income equivalent to what is lower between (1) the amount that could have been collected for the actual free Legal Services rendered, or (2) 10 percent of his/her/their gross income.
To avail of the said deduction, the lawyers or professional partnerships are required to attach to their Income Tax Return a certification from the Public Attorney’s Office, the Department of Justice, or an accredited association of the Supreme Court indicating that: a.) the legal services to be provided are within the services defined by the Supreme Court; b.) the agencies cannot provide the legal services to be provided by the counsel, and c.) the legal services were actually undertaken.
Aside from such certification, the legal professional or office must also provide: (1) accomplished BIR Form No. 1701 (for individual lawyers) or; (2) BIR Form No. 1702-EX (for general professional partnership), particularly Schedules 5 and 2 therein, respectively, on Special Allowable Itemized Deductions, as the incentive provided in the said law and RR are considered as such deductions.
Considering the requirement that the certification from the association and/or organization duly accredited by the Supreme Court must specify the number of hours actually provided by the lawyer or professional partnership in the provision of legal services, the lawyer or professional partnership providing the said services must track their hours and have ready proof of the same.
Notably, the said RR clarifies that to avail the incentives, the legal services provided must fall within the scope of free legal aid service as defined by the Supreme Court in Bar Matter No. 2012 which is appearance in court or quasi-judicial body for, and in behalf of an indigent or pauper litigant and the preparation of pleadings or motions. It shall also cover assistance by a practicing lawyer to indigent litigants in court-annexed mediation and other modes of alternative dispute resolution. Further, services rendered when a practicing lawyer is appointed counsel de oficio shall also be considered free legal aid services.
The question, however, of who is considered a pauper litigant and an indigent litigant, for purposes of availing the incentives under the RR, however, was not defined in the said issuance and thus needs further clarification and definition from the BIR as to which existing definitions or test to follow.
While the Supreme Court’s Bar Matter No. 2012, cited in the issuance, provides for a definition of an indigent litigant in accordance with Rule 141, Sec. 19 of the Rules of Court or those whose gross income and that of their immediate family do not exceed an amount double the monthly minimum wage of and who do not own real property with a fair market value as stated in the current tax declaration of more than P300,000, the Public Attorney’s Office follows a different indigency test.
Under the rules of PAO, those who are considered indigent are those persons who: (1) residing in Metro Manila, earn a net income not exceeding P14,000; (2) residing in other cities, earn a net income not exceeding P13,000; or (3) residing in other places, earn a net income not exceeding P12,000.
It is important to note that such clarification is important as a more precise definition will make it easier and more convenient not only for members of the bar but also for members of the public who now know that they may take their legal problems not only to the PAO or other legal aid service but also to private practitioners, given the grant of incentive to these legal professionals.
Notwithstanding, such questions, as mentioned above, the issuance is still welcome news, as an issuance that actually honors, implements, and makes practicable an actual policy/value upheld by our Constitution.