BIR Ruling [DA-333-00]

August 30, 2000 BIR RULING [DA-333-00] 61 RA 6938 ECCP-018-99 Mr. Jose V. Ramos Certified Public Accountant Room 205, Doll Bldg. 6th St., Bacolod City S i r : This refers to your undated letter requesting on behalf of the Batangas Integrated Sugar Planters Cooperative Marketing Association, Inc. (BISPCMA) for a Certificate of Tax Exemption from the payment of Value-Added Tax (VAT) under Section 109(r) of the Tax Code of 1997. It appears that BISPCMA is a primary agricultural cooperative with Confirmation of Registration No MLA-C-611 dated April 19, 1991 issued by the Cooperative Development Authority (CDA); that the objectives and purposes for which the cooperative was formed are those stated in its Articles of Cooperation; and that you have submitted to this Office in support of your request and in compliance with Section 8 of Revenue Memorandum Circular No 48-91 dated June 18, 1991 the following documents, viz; (1) Confirmation of Registration No. MLA-C-611 issued by the CDA; (2) Articles of Cooperation and By-laws; and (3) Certification that BISPCMA is transacting business only with its members and that at least 25% of the net savings of the cooperative is returned to its members in the form of interest and patronage refund. AaECSH Based on the foregoing and since BISPCMA is an agricultural cooperative transacting business with members only, it is exempt from VAT pursuant to Section 109(r) of the Tax Code of 1997 on its (a) sales to its members, as well as sale of its produce, whether in its original state or processed form, to non-members; (b) importation of direct farm inputs, machineries and equipment, including spare parts thereof to be used directly and exclusively in the production and/or processing of its produce; and (c) 3% gross receipts tax pursuant to Sec. 116 of the same Tax Code. However, BISPCMA should pay the 10% VAT billed to it on its purchase of goods and/or services because said tax is an indirect tax which can be passed on or shifted as part of the cost of 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 the latter's income tax return for tax purposes. It is emphasized, however, that the exemption 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. It is of course understood that the 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 has been complying 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. This ruling is issued on the basis of the foregoing representations. 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.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group