Pagasa Multi-Purpose Development Cooperative

February 20, 2009 BIR RULING [DA-(C-027) 103-09] R.A. 6938; RR 20-2001; DA-396-07 Pagasa Multi-Purpose Development Cooperative Labangan Poblacion, San Jose Occidental Mindoro Attention: Mr. Joel V. Acorda Operations Manager Gentlemen : This refers to your letter dated February 5, 2009 stating that the PAGASA Multi-Purpose Development Cooperative (PMPDC) is a cooperative duly registered with the Cooperative Development Authority (CDA) under CDA Registration No. LGA-0453 dated October 7, 1992 with Tax Identification Number (TIN) 002-239-220-000; that PMPDC is engaged in the manufacture of ice and cold storage; that on July 7, 2008, a Certificate of Exemption was issued in its favor by the Bureau of Internal Revenue (BIR) that it is exempt from income tax; that PMPDC is the registered owner of a parcel of land together with the improvements thereon located in San Jose, Occidental Mindoro, with TCT No. T-10710 issued by the Registry of Deeds for Occidental Mindoro and more particularly described as follows, to wit: IcHSCT Property TCT No. Tax Declaration No. Land T-10710 10-018-0265-C Building 10-018-0266 Building 10-018-0267 Machinery 10-018-0268 that on the other hand, Uniwealth Management and Development Corporation (UNIWEALTH) is a corporation registered with the Securities and Exchange Commission (SEC) with TIN 007-203-159-000; that considering that the above-mentioned property is used in the business of PMPDC it is classified as an ordinary asset; that on January 23, 2009, a Deed of Absolute Sale was executed by PMPDC in favor of UNIWEALTH whereby the former transferred to the latter the aforesaid property for and in consideration of P5,125,168.25. Based on the foregoing representations, you now request for an opinion as to whether PMPDC, as an exempt entity under Republic Act (R.A.) No. 6938, as amended, is not subject to creditable withholding tax on the sale of its property to UNIWEALTH pursuant to Section 2.57.5 (B) of Revenue Regulations No. 2-98, as amended. In reply thereto, please be informed that Section 2.57.5 (B) of Revenue Regulations No. 2-98 provides that "Sec. 2.57.5. Exemption from Withholding. The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: xxx xxx xxx (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: xxx xxx xxx" Prescinding from the above-provisions, it is undisputed that the withholding tax prescribed herein does not apply merely to income payments made to the socialized housing project, BOI registered enterprise, tax exempt entity under Section 30 of the Tax Code and to government-owned or controlled corporations, agencies or instrumentalities, like GSIS, SSS, PCSO and PHIC but also to cooperatives which are exempt from income tax pursuant to R.A. No. 6938, which is a special law. ACcTDS Inasmuch as PMPDC is an exempt cooperative, engaged in the manufacture of ice and ice storage, which is fortified to be exempt by virtue of BIR Ruling No. DA-004-08 dated July 7, 2008, the sale of the above-mentioned property which is used by PMPDC in its line of business is EXEMPT from withholding tax as prescribed in Section 2.5.75 (B) of Revenue Regulations No. 2-98, as amended, in relation to R.A. No. 6938, as amended. However, the said sale shall be subject to the final capital gains tax of 6% and to the corresponding documentary stamp tax. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service