Suyo Multi-Purpose Cooperative

June 30, 2009 BIR RULING [COOP-(M-109) 415-09] COOP; RR 20-2001 Suyo Multi-Purpose Cooperative Suyo, Ilocos Sur Attention: Mr. Rizaldo L. Bencila Manager Gentlemen : This refers to your request for the issuance of a Certificate of Tax Exemption in favor of the Suyo Multi-Purpose Cooperative ("SMPC") under the provisions of R.A. No. 6938, otherwise known as the "Cooperative Code of the Philippines". It is represented that the SMPC, with Taxpayers Identification No. 005-385-283, is registered with the Cooperative Development Authority (CDA) under Certificate of Registration No. R1-FF-030 on September 10, 1981; that it is mainly engaged in extending credit facility to its members and operates a consumers store; that it transacts business primarily with members; 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) Statement of Financial Condition; 5) * Certificate of Operation; 5) Certificate of Good Standing valid and effective until December 31, 2009; 6) 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, SMPC shall be exempt from paying the following taxes: 1. Income Tax on income from operations; 2. Value-added Tax (VAT) on its lending activities under paragraph (M) of Section 109 of the Tax Code of 1997, as amended, and on its sale of goods and services to members under paragraph (N) of Section 109 of the same Code, 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; 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. Further, SMPC is requested to file on or before April 15 of each year, a 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 resources and disposition of income. A copy of this Letter of Exemption must be attached to the Annual Information Return which SMPC will file on said date. TAcDHS Finally, SMPC'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