United Senior Citizen Multi-Purpose Cooperative

April 29, 2009 BIR RULING [COOP-(M-084) 290-09] COOP; RR 20-2001 United Senior Citizen Multi-Purpose Cooperative Gotiaco Building, M.C. Briones & D. Jakosalem Sts. Cebu City Attention: Ms. Flora E. Velez Treasurer Gentlemen : This refers to your request for the issuance of a Certificate of Tax Exemption under the provisions of R.A. No. 6938, otherwise known as the "Cooperative Code of the Philippines". cCTaSH It is represented that the United Senior Citizen Multi-Purpose Cooperative ("USC-MPC"),with Taxpayers Identification No. 253-083-841-000, is registered with the Cooperative Development Authority (CDA) under Certificate of Registration No. CBU-3293-XL on July 9, 2007; that the objectives for which the cooperative was formed are as follows: (1) to uplift the Socio-economic status of all members of the USC-MPC of Cebu City by providing them quality assistance within their reach thus making healthy and productive to maximize their contribution to national development, (2) to encourage among the cooperative members economical management of savings, (3) to inculcate ownership and effective management thru the implantation of the rules and by laws of the cooperative, and (4) to provide each members and other clients (senior citizens) efficient services with the least minimum effort and cost; that at present, it transacts business exclusively with members only; that it has submitted to this Office in support of its request, copies of the following documents, viz. :1) Certificate of Registration; 2) List of Members and their share capital contribution; 3) Certificate of Good Standing dated July 11, 2007; 5) * and other pertinent documents. In reply, please be informed that under Article 61 of Republic Act No. 6938, "duly registered cooperatives which do not transact any business with non-members or the general public shall not be subject to any government taxes or fees imposed under the internal revenue laws and other tax laws". As a duly registered cooperative dealing/transacting with members only, USC-MPC shall be exempt from paying the following taxes: 1. Income Tax on income from operations; 2. Value-added Tax (VAT) on its sale of goods and services to members under paragraph (N) of Section 109 of the Tax Code of 1997, as amended, provided, that the share capital of each member does not exceed P15,000.00 and regardless of the aggregate capital and net surplus ratably distributed among the members; 3. Three Percentage Tax (3%) under Section 116 of the Tax Code of 1997, as amended; 4. Donor's Tax on Donations to duly accredited charitable, research and educational institutions, and reinvestment to socio-economic projects within the area of operation of the cooperative; SCHIac 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. It has to be emphasized, however, that the above-cited tax exemption privileges granted to a cooperative do not extend to its individual members. Thus, members of cooperatives are liable to pay all the necessary internal revenue taxes under the Tax Code of 1997, including the tax on earnings derived from their capital contribution. The proper taxes shall be paid or withheld in the following cases: 1. In case the cooperative will distribute interest on capital, such interest shall be taxable to the recipient member, and shall be declared in his individual income tax return for tax purposes (Sec. 4 (B) (u) of Revenue Regulations No. 6-97); 2. Its interest income from Philippine currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements, and royalties derived from sources within the Philippines shall be subject to 20% Final Tax imposed under Section 27 (D) (1) of the Tax Code of 1997, as amended. It shall also be taxed on prizes, winnings and net gains realized on sales or exchange of property. 3. The cooperative shall be constituted as withholding agent if it acts as an employer and its employees received compensation income subject to withholding tax provided for in Section 79 of the Tax Code, as amended, or if it makes income payments to individuals or corporations subject to Expanded Withholding Tax provided for in Section 57 (B) of the Tax Code, as amended, and as implemented by Revenue Regulations No. 2-98, as amended. CIHTac The above exemption from taxes of USC-MPC shall be valid during such period that the cooperative is in good standing as ascertained by the CDA on annual basis. As such, USC-MPC is hereby requested to submit to the BIR a copy of the Certificate of Good Standing issued by the CDA on or before April 15 of each year, together with the Profit and Loss Statement and Balance Sheet with Annual Information Return under oath, stating the cooperative's gross income and expenses incurred during the year, and a Certificate showing that there has not been any change in the By-Laws and Articles of Cooperation, in its 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 USC-MPC will file on said date. Finally, USC-MPC's Books of Accounts and other pertinent records shall be subject to periodical examination by Revenue Enforcement Officers of this Bureau for purposes of ascertaining whether it complies with the conditions, under which it has been granted tax exemption or tax incentives and it pays tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. 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