Jose C. Leynes

August 18, 2009 BIR RULING [COOP-(M-124) 508-09] RA 6938; 008-2001 Jose C. Leynes Ma. Lourdes L. Guillergan 703-A Vicente Madrigal Building 6793 Ayala Avenue Makati City Attention: Atty. Ma. Lourdes L. Guillergan Gentlemen : This refers to your letter dated June 18, 2009 requesting on behalf of your client, Shared Aims Services Multi-Purpose Cooperative, for a Certificate of Tax Exemption under the provisions of R.A. No. 6938, otherwise known as the "Cooperative Code of the Philippines", as amended. Documents submitted disclosed that the SHARED AIMS SERVICES MULTI-PURPOSE COOPERATIVE is a primary non-agricultural cooperative transacting business with both members and non-members; that it is registered with the Cooperative Development Authority (CDA) with CDA Registration No. C-624-6455 dated May 13, 2008; and that the objectives and purposes for which it is formed are the following: 1. To be a service provider by contracting work services and projects with clients by harnessing the skills of the members of the cooperative as a manpower resource; 2. To create funds in order to grant loans for productive and providential purposes to members; 3. To provide savings and credit facilities to its members and develop other livelihood services for the cooperative; and that it has submitted to this Office in support of its request and in compliance with Section 8 of Revenue Memorandum Circular No. 48-91 dated June 18, 1991 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; and (4) Financial Statement for the Year 2008. TAacCE In reply, please be informed that Section 3.1 of Revenue Regulations No. 20-2001, provides that duly registered cooperatives dealing/transacting business with members only shall be exempt from paying the following taxes for which they are 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, it is liable to pay the 12% VAT billed 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 it 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, its 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 your 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. It 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, it is are * required to file on or before the 15th day of the fourth month following the close of its accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating your 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. SEDaAH It is of course understood that its 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 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service