Hilltop Multi-Purpose Cooperative

March 3, 2009 BIR RULING [COOP-(M-049) 181-09] RA 6938; ECCP-02-2002 Hilltop Multi-Purpose Cooperative Block 50, Lot 3 Parkwood Hills Subdivision Payatas, Quezon City Attention: Mr. Rogelio S. Galang Chairman Gentlemen : This refers to your letters dated August 30, 2006, requesting for a tax exemption under the provisions of R.A. No. 6938, otherwise known as the Cooperative Code of the Philippines. It appears that HILLTOP MULTI-PURPOSE COOPERATIVE is a multipurpose cooperative with Certificate of Registration No. N-621-4122 dated December 23, 2002 from the Cooperative Development Authority (CDA); that the objectives and purposes for which you are formed are those stated in the Articles of Cooperation; and that you have submitted to this Office in support of your request and in compliance with Section 8 of Revenue Memorandum Circular No. 48-91 dated June 18, 1991 the following documents, viz. : (1) Certificate of Registration from the CDA; (2) Articles of Cooperation and By-laws; (3) Certification under oath of the list of members and the share capital contribution of each members; and (4) Latest Audited Financial Statements. Based on the foregoing, HILLTOP MULTI-PURPOSE COOPERATIVE is exempt from income tax on income from operation, pursuant to Article 61 of R.A. No. 6938. Moreover, under Section 109 paragraphs (M) and (N) of the Tax Code of 1997, as amended by RA 9337, a multi-purpose cooperative duly registered with the CDA is exempt from VAT on the following: 1. Gross receipts from lending activities; and SAEHaC 2. Sale of items, provided, that the share capital contribution of each member does not exceed Fifteen Thousand Pesos (P15,000.00) and regardless of the aggregate capital and net surplus ratably distributed among the members. It is also exempt from the 3% gross receipts tax under Section 116 of the same Code. Finally, it is not liable to pay the annual registration fee of P500.00 imposed under Section 236 (B), also of the Tax Code of 1997, but it is not exempt from registration. However, the cooperative is liable to pay the 12% VAT billed to it on its purchases of goods and services because the said tax is an indirect tax which can be passed on or shifted as part of the cost of the goods sold/services rendered. In case it will distribute interest on capital, such interest shall be taxable to the recipient member and shall be declared in his income tax return for tax purposes. Furthermore, its interest income from currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements and royalties derived from sources within the Philippines and the interest income it derives from a depository bank under the expanded foreign currency deposit system shall be subject to the 20% and 7.5% final tax, respectively, imposed under Section 27 (D) (1) of the Tax Code of 1997. The cooperative shall also be taxed on capital gains realized on sales or exchanges of property. It is emphasized, however, that the exemption of the cooperative does not extend to the individual members thereof. Moreover, the cooperative shall be constituted as a withholding agent if it acts as an employer and its employees receive compensation income subject to withholding tax, or if it makes income payment to individuals or corporations subject to the withholding tax provided for in Sections 57 of the Tax Code of 1997. Furthermore, said members shall be taxed on prizes, winnings and capital gains realized on sales or exchanges of properties. DCScaT Finally, it is required to file on or before the 15th day of the fourth month following the close of its accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the year and a certificate showing that there has not been any change in the By-Laws, Articles of Cooperation, manner of activities as well as sources and disposition of income. A copy of this letter of exemption must be attached to the Annual Information Return, which it will file on or before said date. It is of course understood that the cooperative's books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether it has been complying with the conditions under which it has been granted tax exemption or tax incentives and its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997. (BIR Ruling No. ECCP-17-2001 dated July 30, 2001) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service