BIR Ruling [DA-518-06]

August 25, 2006 BIR RULING [DA-518-06] RMC72-2003, 61-2005; DA-021-2004 Pampanga I Electric Cooperative, Inc. Sto. Domingo, Mexico, Pampanga Attention: Engr. Loliano E. Allas General Manager Gentlemen : This refers to your letter dated January 24, 2006 requesting exemption from income tax and all other national government taxes pursuant to Presidential Decree No. 269. It is represented that Pampanga I Electric Cooperative, Inc. is a cooperative registered with the National Electrification Administration; and that it would like to avail of the tax benefits under the law. 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 . . . ." ECAaTS However, beginning November 1, 2005, generation, transmission, and distribution companies as well as electric cooperatives shall be subject to the value-added tax on their sale of electricity pursuant to the provisions of Section 108, in relation to Section 109, both of the Tax Code of 1997 as implemented by Revenue Memorandum Circular No. 61-2005 dated October 27, 2005. Accordingly, Pampanga I Electric Cooperative, Inc. is exempt from income tax for which it is directly liable. It is also exempt from all other national government taxes and fees, including franchise, filing, recordation, license or permit fees or taxes until June 8, 2014, which is the thirtieth full calendar year after the date of the cooperative's organization in 1984 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service