Cavite Farmers Feedmilling and Marketing Cooperative

August 22, 2008 BIR RULING [DA-(C-049) 173-08] RR 8-2005; DA-602-2006 Cavite Farmers Feedmilling and Marketing Cooperative By-Pass, San Vicente II Silang, Cavite Attention: Mr. Arnel C. Marasigan General Manager Gentlemen : This refers to your letter dated September 11, 2007, requesting certificate of exemption of the Cooperative from the 35% withholding tax imposed under Revenue Regulations No. 8-2005. It is represented that Cavite Farmers Feedmilling Marketing Cooperative (Feedmilling) was granted in a previous ruling (RDA-RR#09-Ruling No. 123-2003) tax exemption from income tax and value added tax; that it is a cooperative organized to encourage thrift and savings mobilizing among the members for capital contribution, among others, and that since Feedmilling is exempt from income tax, it is your opinion that the refund to Feedmilling by MERALCO of the excess utility payments is exempt from the withholding tax imposed under Revenue Regulations No. 8-2005. In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations (RR) No. 2-98, as amended by RR Nos. 3-2004 and 8-2005, is explicit that the expanded withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. Since Cavite Farmers Feedmilling Marketing Cooperative is a multi-purpose cooperative duly registered with the Cooperative Development Authority, it is exempt from payment of income tax pursuant to Article 61 of the Cooperative Code of the Philippines. As such, it is exempt from the payment of income tax on income received by it as such organization and consequently from the expanded withholding tax. Moreover, since the excess utility payments pertain to expense related to Feedmilling's primary purposes, then the refund which will be received by Feedmilling is not subject to the 35% regular corporate income tax because Feedmilling is an exempt corporation as provided for under R.A. 6938. In sum, the MERALCO refund to Feedmilling arising from the Supreme Court case of G.R. No. 141314 dated April 9, 2003 of the excess utility payments which were incurred and paid by MEM II as an exempt organization under Section 30 (C) of the Tax Code of 1997 is exempt from the 35% regular corporate income tax, and consequently, from the 35% withholding tax imposed under RR No. 8-2005. CcAHEI 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