Southern Leyte State University Credit Cooperative (formerly Southern Leyte State College of Science and Technology Credit Cooperative)

December 11, 2009 BIR RULING [COOP-(M-162) 772-09] RA 6938; COOP(M-051)222-2008 Southern Leyte State University Credit Cooperative (formerly Southern Leyte State College of Science and Technology Credit Cooperative) SLSU, Sogod, Southern Leyte Attention: Mr. Jessie A. Cola Chairman, Board of Directors Gentlemen : This refers to your letter dated January 9, 2008, which was received by this Office by way of 1st Indorsement dated February 27, 2008 of Revenue District No. 90, Maasin City, Southern Leyte, requesting for a tax exemption under the provisions of Republic Act (R.A.) No. 6938, otherwise known as the Cooperative Code of the Philippines. SHECcD It appears that SOUTHERN LEYTE STATE UNIVERSITY CREDIT COOPERATIVE with TIN 005-356-440 is a credit cooperative with Certificate of Registration No. TAC-1949 dated March 8, 1999 from the Cooperative Development Authority (CDA); that the cooperative deals with members only; that the objectives and purposes for which it was formed are those set forth in its Articles of Cooperation and those generally granted to cooperatives under R.A. 6938. In support of your request and in compliance with Section 8 of Revenue Memorandum Circular No. 48-91 dated June 18, 1991, SOUTHERN LEYTE STATE UNIVERSITY CREDIT COOPERATIVE has submitted the following documents, viz. : (1) Certificate of Registration from the CDA; (2) Articles of Cooperation and By-laws; (3) Certification under oath of the list of members and the share capital contribution of each members; (4) Certificate of Good Standing. 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 it is 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. 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 IAEcaH 6. 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 you 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 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 Section 57 of the Tax Code of 1997, as amended by Republic Act No. 9337. Furthermore, said members shall be taxed on prizes, winnings and capital gains realized on sales or exchanges of properties. Finally, SOUTHERN LEYTE STATE UNIVERSITY CREDIT COOPERATIVE is 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 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. It is of course understood that the 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 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. ACETIa Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service