BIR Ruling [DA-021-04]

January 15, 2004 BIR RULING [DA-021-04] RMC72-2003; ECCP-006-2003 Negros Occidental Electric Cooperative, Inc. Kabankalan, Negros Occidental Attention: Mr. Lamberto M. Canlas General Manager Gentlemen : This refers to your letter dated May 12, 2003 requesting exemption from income tax and all other national government taxes pursuant to Presidential Decree No. 269 and clarified by the DOF-NEA Circular No. 1-97 dated July 22, 1997. It is represented that you are a cooperative registered with the National Electrification Administration under NEA Registration No. 103, dated February 25, 1978; that you attached, for our perusal, the following documents: your audited financial statements for the years 2001 and 2002, a DOF-NEA Circular No. 1-97, your Articles of Incorporation and By-Laws; that the taxes being withheld from you is causing a substantial revenue shortfall; that the basic electric rates of electric cooperatives do not include the payment of taxes; and that taxation at this point would be very disastrous to your financial operations. In reply, please be informed that Section A (3) and (4) of Revenue Memorandum Circular No. 72-2003 dated October 20, 2003 provides: "A. Electric Cooperatives (Ecs) registered with the National Electrification Administration (NEA) are exempt from: xxx xxx xxx 3. Income taxes for which they are directly liable [P.D. No. 269, Sec. 39(a)91)]; 4. All National Government taxes and fees, including franchise, filing, recordation, license or permit fees or taxes. Provided, however, that the said exemption shall end on December 31 of the thirtieth full calendar year after the date of the cooperative's organization or conversion, or until it shall become completely free of indebtedness incurred by borrowing, whichever event first occurs. Provided further, that the period of exemption for a new cooperative formed by consolidation, as provided in Section 29 of P.D. No. 269, to begin as of the date of the beginning of such period for the constituent consolidating cooperative which was most recently organized or converted under P.D. No. 269 . . . ." Accordingly, you are exempt from income tax for which you are directly liable. You are also exempt from all other national government taxes and fees, including franchise, filing, recordation, license or permit fees or taxes until December 31, 2008, which is the thirtieth full calendar year after the date of the cooperative's organization in 1978 or until it shall become completely free of indebtedness incurred by borrowing, whichever event comes first. In the case of a new cooperative formed by consolidation, as provided in Section 29 of P.D. No. 269, the period of exemption shall begin as of the date of the beginning of such period for the constituent consolidating cooperative which was most recently organized or converted under P.D. No. 269.The said exemption shall likewise end on December 31 of the thirtieth full calendar year after the date of the cooperative's organization or conversion, or until it shall become completely free of indebtedness incurred by borrowing, whichever event first occurs pursuant to the aforementioned Revenue Memorandum Circular No. 72-2003. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service