BIR Ruling [DA-368-98]

August 17, 1998 BIR RULING [DA-368-98] Ms. Merlinda L. Ordoyo Acting Assistant Regional Director Revenue Region No. 2 Bacolod City M a d a m : This refers to your 2nd Indorsement dated May 8, 1998 to the Assistant Commissioner, Legal Service, as well as to your follow-up letter dated June 2, 1998, relative to the undated letter of Mr. Jose V. Ramos, on behalf of the VMC Farmers Cooperative, Inc., 2nd Floor, Fidelity Motors Co. Bldg., 24 Lacson St., Bacolod City, protesting your directive, requiring VMC Farmers Cooperative, to secure a new tax exemption certificate, and to continue securing clearance for the withdrawal of its refined sugar without the advance payment of VAT. cdt It appears that the BIR granted the VMC Farmers Cooperative, Inc. on January 17, 1992 (ECCP No. 008-92, January 27, 1992) an exemption from the payment of all taxes and fees, imposed under the internal revenue laws and other tax laws pursuant to Section 61 of R.A. No. 6938, otherwise known as the Cooperative Code of the Philippines. The exemption however, does not include the 10% value-added tax which might be passed on or billed to the cooperative by the seller/vendor on its purchases of goods and/or services. Moreover, the exemption shall be for the period of ten (10) years only, reckoned from the date of its registration with the Cooperative Development Authority (CDA) on May 22, 1991, or until May 22, 2002. The basis of your directive to the cooperative to secure a new tax exemption certificate is because under R.A. No. 7716 which took effect on January 1, 1996, as implemented by Revenue Regulations No. 7-95, cooperatives, except electric cooperative, duly registered under R.A. No. 6938, otherwise known as the Cooperative Code of the Philippines, transacting business with members only or with both members and non-members are subject to VAT; that with the passage of R.A. No. 8241 amending R.A. No. 7716, which took effect on January 1, 1997, sales by agricultural cooperatives, duly registered with the CDA to their members, as well as the sale of their produce, whether it its original state or processed form, to non-members are exempt from VAT. However, considering that there has been no allegation, as to the change of the objectives and purposes, for which the cooperative was formed, as stated in its Articles of Cooperation, and which was the basis of the tax exemption granted by this Office pursuant to Article 61 of the Cooperative Code, there is no need to secure a new certificate of tax exemption. The changes in our VAT law, subjecting the cooperative to VAT under R.A. No. 7716, and later exempting it from VAT under R.A. No. 8241 can be effected by your Office, without requiring the cooperative to secure a new certificate of tax exemption from this Office. Moreover, the requirement of that Office, for the cooperative, to secure a clearance for every withdrawal of its refined sugar, for monitoring and control purposes, is in order. cdll Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group