BIR Ruling

October 3, 1973 Mr. Filomeno D. Pacaldo Revenue District Officer Revenue District No. 57 Ormoc City S i r : This refers to your letter dated August 28, 1973 requesting information whether or not a gasoline station registered as a cooperative under Republic Act No. 2023, otherwise known as the "Philippine Non-Agricultural Cooperative Act is exempt from the payment of income and fixed taxes and the filing of income tax return. It is represented that on August 2, 1973 you sent a letter to the Manager of the Western Leyte Cooperative, Inc., operator of Ormoc Esso Servicenter, a cooperative registered under Republic Act No. 2023, Ormoc City requesting the filing of income tax returns for the years 1968, 1969, 1970, 1971, and 1972, and the payment of income taxes which might be due thereon pursuant to Section 24(d) of the Tax Code, as well as fixed taxes for each year of operation. However, in its letter dated August 10, 1973, the Western Leyte Cooperative, Inc. maintains that it is exempt from all taxes and government fees of whatever nature under Section 66 of RA No. 2023. And in support of its claim for exemption, it invoked Presidential Decree No. 175 dated April 14, 1973. In reply, please be informed that a cooperative registered under Republic Act No. 2023, as amended by Republic Act No. 4362, otherwise known as the "Philippine Non-Agricultural Cooperative Act" is entitled to tax exemption pursuant to Section 66 thereof which provides: "SEC. 66. . . . "(1) Cooperative with net assets of not more than five hundred thousand pesos shall be exempt from all taxes and government fees of whatever name and nature except those provided for under this Act: Provided, however , That cooperative having net assets in excess of five hundred thousand pesos shall pay taxes as provided hereunder: aisadc (a) Income Tax they shall pay tax at the full rate as provided under existing laws on the amount allocated for interest on capital; (b) Sales Tax they shall pay fixed and percentage taxes at the full rate as provided under existing laws; and (c) They shall pay all other taxes, unless otherwise provided under existing laws. "(2) They shall be exempt from the payment of documentary stamp tax, residence taxes, tax on banks and insurance companies and municipal or city taxes, Provided, however , That no cooperative organized under this Act shall be exempt from the payment of specific taxes levied by the National Internal Revenue Code on all articles or merchandise manufactured by such cooperative." As regards the enjoyment of income tax exemption by cooperative under Republic Act No. 2023, as amended by Republic Act No. 4362, it is, however, the position of this Office that the same had already been repealed by the provision of Section 24(d) of the Tax Code, as amended by Republic Act No. 5431 which became effective July 1, 1968, Accordingly, the Western Leyte Cooperative, Inc. is subject to the payment of income tax and to the filing of income tax return irrespective of the amount of its net assets for the taxable period beginning July 1, 1968 in accordance with the provision of Section 24(d) of the Tax Code, as amended. It should be noted that although Presidential Decree No. 175 has provided for the repeal of all past cooperative laws and has granted the privilege of exemption from income tax and sales tax to registered cooperatives, said Decree was only promulgated on April 14, 1973, and therefore, the privilege of exemption provided therein cannot be invoked insofar as the income tax liability of the Western Leyte Cooperative, Inc. for the years 1968, 1969, 1970, 1971 and 1972 is concerned. cdtech Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5