Makati City Employees Credit Cooperative

March 19, 2009 BIR RULING [COOP-(M-064) 226-09] RA 6938; 008-2001 Makati City Employees Credit Cooperative J.P. Rizal St. Cor. F. Zobel St., Makati City Attention: Ms. Lorenza P. Amores Chairwoman Gentlemen : This refers to your letter dated December 06, 2006 requesting for a Certificate of Tax Exemption under the provisions of Republic Act No. 6938, otherwise known as the "Cooperative Code of the Philippines". Documents submitted disclosed that Makati City Employees Credit Cooperative (TIN No. 049-003-829-574-NV) with principal address at J.P. Rizal St. Cor. F. Zobel St., Makati City is a primary credit cooperative transacting with members only; that it is registered with the Cooperative Development Authority with Registration No. MLA-1556 dated October 04, 1991; that the objectives and purposes for which it is formed are the following: 1. To encourage thrift and savings mobilization among members for the capital formation; 2. To create funds in order to grant loans for productive and providential purposes to its members; 3. To provide related services to enable its members to maximize the benefits from such loans; 4. To promote the cooperative as a way of life for improving the social and economic well-being of people; 5. To do any related activity for the members of self-government, improve social and economic well-being under a truly just and democratic society; 6. To work with cooperative movement, non-government organization/entities in the promotion and development of cooperatives and carrying out government policies; 7. To undertake other activities for the effective and efficient implementation of the provisions of the Cooperative Code. In support of its request and in compliance with Revenue Regulations No. 20-2001 dated November 12, 2001, Makati City Employees Credit Cooperative has submitted the following documents, viz. : (1) Certificate of Registration of the Amendments to the Articles of Cooperation and By laws from the Cooperative Development Authority; (2) Original Articles of Cooperation and By-laws; (3) BIR Certificate of Registration; (4) Certification under oath by the Chairman to the effect that the Cooperative is dealing with members only and; (4) * List of members and their share capital. CcTHaD In reply, please be informed that Section 3.1 of Revenue Regulations No. 20-2001, provides that a duly registered cooperative dealing/transacting business with members only shall be exempt from paying the following taxes for which it is directly liable, viz. : 1. Income tax on income from operations; 2. Value-added tax (VAT) under Section 109 (M) of the Tax Code of 1997, as amended; 3. Percentage tax under Section 116 of the Tax Code of 1997; 4. Donor's tax on donations to duly accredited charitable, research and educational institutions, and reinvestment to socio-economic projects; 5. Excise tax under Title VI of the Tax Code of 1997; 6. Documentary stamps tax imposed under Title VII of the Tax Code of 1997, provided, however, that the other party to the taxable document/transaction who is not exempt shall be the one directly liable for the tax; and 7. Annual registration fee of P500.00 under Section 236 (B) of the Tax Code of 1997, as amended by RA 9337. However, you are not exempt from registration. However, the cooperative is liable to pay the 12% VAT 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 the cooperative 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, the cooperative's 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 derived 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, as amended. 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, as amended. Furthermore, said members shall be taxed on prizes, winnings and capital gains realized on sales or exchanges of properties. Finally, Makati City Employees Credit Cooperative is required to file on or before the 15th day of the fourth month following the close of your 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. CcaASE 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 complies with the conditions under which it has been granted tax exemption or tax incentives and pays its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. (BIR Ruling No. ECCP-009-2003 dated December 2, 2003). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service