BIR Ruling

February 10, 1977 Director Clemente E. Terso, Jr. Bureau of Cooperatives Development 13th Floor Quezon City Hall Quezon City S i r : This refers to your letter dated October 20, 1976 requesting information whether cooperatives existing under Previous laws which applied for re-registration with that Office within six (6) months from the issuance of Presidential Decree No. 175 on April 14, 1973 continued to enjoy the privileges prescribed by the laws under which they were originally registered in the meantime that their applications have not been acted upon. In reply, I have the honor to inform you in the negative, since under Section 11 of P.D. 175, "all past cooperative laws are hereby repealed." In this connection, pertinent portions of P.D. 175 read as follows: "Section 5. Privileges of Cooperatives . Cooperatives shall enjoy the following privileges: "(a) Exemption from income taxes and sales taxes provided that a substantial portion of the net income of the cooperative is returned to members in the form of interests and/or patronage refunds; Provided, further, that for income tax purposes, non-agricultural cooperatives shall be exempt for a period of five (5) years and agricultural cooperatives for a period of ten (10) years reckoned from the date of registration with the Department of Local Government and Community Development; Provided, finally, that the taxable income shall mean that portion of the cooperative's income after deducting the interest paid to members and patronage refunds; "xxx xxx xxx "Section 8. Powers of Regulatory Agency . The Department of Local Government and Community Development through the Bureau of Cooperatives Development is vested with full authority to promulgate rules and regulations to govern the promotion, organization, registration, regulation and supervision of all types of cooperatives, specifically, it shall have the following powers; "xxx xxx xxx "(b) To register new cooperatives, re-register existing cooperatives and regulate and supervise the following types of cooperatives: "xxx xxx xxx "Provided, that, in the case of re-registration, the cooperative shall file its application or petition for re-registration within a period of six (6) months from the date of promulgation of this Decree, and its corporate existence shall be deemed to continue until the application or petition is approved or denied; and Provided, further, that for purposes of re-registration, Sections 2 and 5(a) hereof shall not be applicable to existing cooperatives which do not meet the qualification requirements provided for in this Decree." cd Under the above-quoted provisions of P.D. 175, existing cooperatives which applied for re-registration within the six-month period continue their corporate existence, but are not entitled to enjoy the tax exemption privileges prescribed under Section 5(a) thereof if they did not meet the qualification requirements of the Decree. In other words, an existing cooperative does not automatically enjoy the exemption privileges under Section 5(a) of P.D. 175 above-quoted merely because it filed its application for re-registration, as the Decree specifically provides that the exemption privileges do not apply if the cooperative does not meet the qualification requirements of the said Decree. On the other hand, if its application is approved which presupposes that the qualification requirements of P.D. 175 have been met, then it is entitled to the tax exemption privileges prescribed by Section 5(a) of said Decree, retroactive as of April 14, 1973, the date of promulgation thereof. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3