Negros Del Norte Planters Association Multi-Purpose Cooperative

May 19, 2009 BIR RULING [COOP-(M-087) 320-09] RA 6938; RR 20-2001; COOP Negros Del Norte Planters Association Multi-Purpose Cooperative VICMICO Compound, Victorias City Negros Occidental Attention: Mr. Armin A. Evangelista Manager Gentlemen : This refers to your letter dated January 8, 2009 requesting, in effect, for the renewal of the Certificate of Tax Exemption granted to Negros Del Norte Planters Association Multi-Purpose Cooperative (NDNPA-MPC) under BIR Ruling No. ECCP-032-99 dated October 7, 1999, pursuant to the provisions of Republic Act No. 6938, otherwise known as the "Cooperative Code of the Philippines". STDEcA Documents submitted disclosed that NDNPA-MPC with Taxpayer Identification No. 004-243-846 is a primary agricultural multi-purpose cooperative transacting business with both members and non-members; that it grants loans for productive and providential purpose to its members only; that it is registered with the Cooperative Development Authority (CDA) under Certificate of Registration No. ILO-3468 on August 16, 1999; that a Certificate of Good Standing was issued by the CDA in its favor on December 15, 2008 and valid until April 15, 2009; and that the accumulated reserves or undivided net savings of NDNPA-MPC for the period ending August 31, 2008, has not exceeded the threshold of Ten Million Pesos. In reply, considering that NDNPA-MPC's accumulated reserves or undivided net savings is not more than Ten Million Pesos (P10M) since from the start of its operation up to the present, this Office therefore rules that NDNPA-MPC continues to be exempt from income tax despite the expiration of its tax incentives this coming August 31, 2009. However, if NDNPA-MPC's accumulated reserves or undivided net savings exceeds Ten Million Pesos in a particular taxable year, all its income derived from business transactions/dealings with non-members for that year shall be subject to the regular income tax. (BIR Ruling No. ECCP-020-2001 dated October 12, 2001 cited in BIR Ruling No. DA-281-2003 dated August 26, 2003) Moreover, NDNPA-MPC shall continue to be exempt from value-added tax (VAT) on its sales to members, as well as the sale of its produce, whether in its original state or processed form, to non-members, pursuant to Section 109 paragraph (L) of the Tax Code of 1997, as amended. Likewise, NDNPA-MPC's gross receipts from its lending activity to its members shall continue to be exempt pursuant to Section 109 paragraph (M) of the Tax Code. Further, NDNPA-MPC's exemption from the 3% gross receipts tax under Sec. 116 of the same Tax Code shall continue to be in effect. On the other hand, NDNPA-MPC continues to be exempt from the payment of the following taxes, to wit: 1. 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; caAICE 2. Excise Tax under Title VI of the Tax Code of 1997, as amended; 3. Documentary Stamps Tax imposed under Title VII of the Tax Code of 1997, as amended, 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 4. Annual Registration Fee of P500.00 under Section 236 (B) of the Tax Code of 1997, as amended. However, NDNPA-MPC is hereby reminded 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, as amended, 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. SIcEHD 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. Further, NDNPA-MPC is requested to file on or before the 15th day of the fourth month after the close of the fiscal year, a Profit and Loss Statement and Balance Sheet with Annual Information Return under oath, stating the NDNPA-MPC'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 resources and disposition of income. A copy of this Letter of Exemption must be attached to the Annual Information Return which NDNPA-MPC will file on said date. Finally, NDNPA-MPC's Books of Accounts and other pertinent records shall be subject to periodical examination by Revenue Enforcement Officers of this Bureau for the 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