AEC Development Cooperative

June 10, 2008 BIR RULING [ECCP-064-08] R.A. 6938; ECCP-02-2002 AEC Development Cooperative (Formerly Kapatiran MPC) Greenhills cor. Dalahican Road Marketview, Lucena City Attention: Ms. Lilia T. Atienza Manager Gentlemen : This refers to your letter requesting for tax exemption under the provisions of R.A. No. 6938, otherwise known as the Cooperative Code of the Philippines. caSDCA It appears that AEC DEVELOPMENT COOPERATIVE is a multipurpose cooperative with Certificate of Registration No. CA-4487-820 dated April 24, 2006 from the Cooperative Development Authority (CDA); that the objectives and purposes for which it is formed are as follows: 1) To encourage thrift and savings mobilization among the members for capital formation; 2) To create funds in order to grant loans for productive and providential purposes to its members; 3) To provide goods and services and other requirements of the members; 4) To engage in (which of the following: medical, dental care, hospitalization, transportation, communication, housing, labor, electric, light and power, irrigation, market management, janitorial services, etc.); 5) To promote cooperative as a way of life for improving the social and economic well-being of the people; 6) To do any related activity for the members self-government, improve social and/or economic well-being under a truly just democratic society; 7) To work with the cooperative movement, non-government and government organization/entities in the promotion and development of cooperatives and in carrying out government policies; 8) To undertake other activities for the effective and efficient implementation of the provisions of the Cooperative Code; 9) The cooperative shall give the tithes of the net surplus to One in Christ International Church, Inc. EcSCAD and that it has submitted to this Office in support of its request and in compliance with Section 8 of Revenue Memorandum Circular No. 48-91 dated June 18, 1991 the following documents, viz. : (1) Certificate of Registration from the CDA; (2) Articles of Cooperation and By-laws; (3) Certification under oath of the list of members and the share capital contribution of each member; (4) Certificate of Good Standing from the CDA; and (5) Latest Audited Financial Statements. Based on the foregoing, AEC DEVELOPMENT COOPERATIVE is exempt from income tax on income from its operation pursuant to Article 61 of R.A. No. 6938. Moreover, AEC DEVELOPMENT COOPERATIVE is exempt from the value-added tax (VAT) on its gross receipts from lending activities under Section 109 (M) of the Tax Code of 1997, as amended by R.A. No. 9337, as implemented by Revenue Regulations No. 16-2005, as amended. AEC DEVELOPMENT COOPERATIVE is also exempt from the payment of the 3% percentage tax and the annual registration fee of P500, respectively imposed under Sections 116 and 236 (B) of the same Code, but it is not exempt from registration. SHAcID Furthermore, AEC DEVELOPMENT COOPERATIVE interest income from currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements and royalties derived from sources within the Philippines and interest income it will derive from a depositary bank under the expanded foreign currency deposit system shall be subject to the 20% and 7.5% final tax, respectively, imposed under Section 27 (D) (1) of the Tax Code of 1997. It shall also be taxed on capital gains realized on sales or exchanges of property. It is emphasized, however, that the exemption of the cooperative 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 provided for in Section 57 of the Tax Code of 1997. Furthermore, said members shall also be taxed on prizes, winnings and capital gains realized on sales or exchanges of properties. Finally, AEC DEVELOPMENT COOPERATIVE is required to file on or before the 15th day of the fourth month following the close of its accounting period, a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the year and a certificate showing that there has not been any change in the By-Laws, Articles of Cooperation, manner of activities as well as sources and disposition of income. A copy of this letter of exemption must be attached to the Annual Information Return which it will file on or before said date. SaIEcA It is of course understood that its books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purposes 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. (BIR Ruling No. UN-ECCP-064-95 dated August 29, 1995 cited in BIR Ruling No. UN-ECCP-009-96 dated February 28, 1996 ) 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service