Ugnayan Transport Service and Multi-Purpose Cooperative

April 3, 2009 BIR RULING [COOP-(M-069) 252-09] RA 6938; 008-2001 Ugnayan Transport Service and Multi-Purpose Cooperative No. 3 Bernadette St., Provident Villages, Tanong, Marikina City Attention: Mr. Leoncio Daelo Finance Officer Gentlemen : This refers to your letter dated March 03, 2008 which was indorsed to this office by the Revenue Region No. 7, Legal Division, Quezon City 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 Ugnayan Transport Service and Multi-Purpose Cooperative (TIN No. 209-038-759) with principal address at No. 3 Bernadette St., Provident Villages, Tanong, Marikina City is a primary transport service cooperative transacting with member-operators only; that it is registered with the Cooperative Development Authority with Registration No. G-624-2802 dated December 29, 2000; that a Certificate of Good Standing has been issued in its favor by Mr. Manuel C. Lapea Administrator, OIC-Manila Extension Office; that the objectives and purposes for which it was formed are the following: 1. To increase and establish the income of its members by providing continuing government opportunities; 2. To develop traits of discipline, involvement, collective effort, management and operational efficiency among members; 3. To provide transportation service to the commuting public; and 4. To create funds in order to grant loans for productive and providential purposes; and 5. To engage in supply center and provide automobile services. In support of its request and in compliance with Revenue Regulations No. 20-2001 dated November 12, 2001, Ugnayan Transport Service and Multi-Purpose Cooperative has submitted the following documents, viz. : (1) Certificate of Registration from the Cooperative Development Authority; (2) Articles of Cooperation and By-laws; (3) BIR Certificate of Registration; (4) Comparative Financial Statement for the Years 2006 and 2007; and (5) Certificate of Good Standing from CDA. aHcACT 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 (N) of the Tax Code of 1997, as amended; Provided, That the share capital contribution of each member does not exceed fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net surplus ratably distributed among the members; 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, Ugnayan Transport Service and Multi-Purpose 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. DaAISH It is of course understood that 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 have 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