Calamba Multi-Purpose Cooperative

June 17, 2008 BIR RULING [ECCP-065-08] R.A. 6938; RR 20-2001; COOP Calamba Multi-Purpose Cooperative Burgos St., Calamba City Attention: Ms. Flordeliza R. Bicaldo Manager Gentlemen : This refers to your letter dated March 28, 2007 indorsed to this Office on November 5, 2007, requesting, in effect, for the renewal of your Certificate of Tax Exemption previously confirmed by this Bureau under RDA No. 44-03 dated May 13, 2003, issued by the Office of the Regional Director of Revenue Region No. 9, San Pablo City. aCATSI It appears that Calamba Multi-Purpose Cooperative (CMPC) is a multi-purpose cooperative registered with the Cooperative Development Authority (CDA) with Certificate of Registration No. MLA-332 dated March 27, 1991; that a Certificate of Good Standing was issued by the CDA in its favor on July 2, 2007; that CMPC is transacting business with both members and non-members; that the accumulated reserves or undivided net savings of CMPC from the period starting December 31, 2002 up to December 31, 2007, has not exceeded the threshold of Ten Million Pesos; that the Bureau issued BIR Ruling No. RDA No. 44-03 dated May 13, 2003 exempting CMPC from all taxes and fees imposed under the internal revenue laws and other tax laws pursuant to Article 61 of the Cooperative Code, for a period of ten (10) years reckoned from May 27, 1991, the date of registration of CMPC with the CDA; and that based on the reckoning date of the tax exemption of CMPC as confirmed under RDA No. 44-03 said exemption already lapsed on March 27, 2001. In reply, considering that CMPC's accumulated reserves or undivided net savings is not more than Ten Million Pesos (P10M) since the period starting from the expiration of its tax exemption in 2001 up to 2007, this Office therefore rules that CMPC continues to be exempt from income tax despite the expiration of its tax incentives on March 27, 2001. However, if CMPC's accumulated reserves or undivided net savings exceeds Ten Million Pesos in a particular taxable year, all its income derived from business transactions/dealings with non-members for that year shall be subject to the regular income tax. (BIR Ruling No. ECCP-020-2001 dated October 12, 2001 cited in BIR Ruling No. DA-281-2003 dated August 26, 2003) Moreover, CMPC's gross receipts from its lending activities shall continue to be exempt from value-added tax (VAT) pursuant to Section 109 paragraph (M) of the Tax Code of 1997, as amended. Likewise, CMPC's exemption from the 3% gross receipts tax under Sec. 116 of the same Tax Code shall continue to be in effect. On the other hand, CMPC continues to be exempt from the payment of the following taxes, to wit: 1. Donor's Tax on Donations to duly accredited charitable, research and educational institutions, and reinvestment to socio-economic projects within the area of operation of the cooperative; 2. Excise Tax under Title VI of the Tax Code of 1997, as amended; 3. Documentary Stamps Tax imposed under Title VII of the Tax Code of 1997, as amended, provided, however, that the other party to the taxable document/transaction who is not exempt shall be the one directly liable for the tax; and 4. Annual Registration Fee of P500.00 under Section 236 (B) of the Tax Code of 1997, as amended. AaHTIE However, CMPC is hereby reminded that the above-cited tax exemption privileges granted to a cooperative do not extend to its individual members. Thus, members of cooperatives are liable to pay all the necessary internal revenue taxes under the Tax Code of 1997, including the tax on earnings derived from their capital contribution. The proper taxes shall be paid or withheld in the following cases: 1. In case your cooperative will distribute interest on capital, such interest shall be taxable to the recipient member, and shall be declared in his individual income tax return for tax purposes (Sec. 4 (B) (u) of Revenue Regulations No. 6-97); 2. Its interest income from Philippine currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements, and royalties derived from sources within the Philippines shall be subject to 20% Final Tax imposed under Section 27 (D) (1) of the Tax Code of 1997, as amended. It shall also be taxed on prizes, winnings and net gains realized on sales or exchange of property. 3. The cooperative shall be constituted as withholding agent if it acts as an employer and its employees received compensation income subject to withholding tax provided for in Section 79 of the Tax Code, as amended, or if it makes income payments to individuals or corporations subject to Expanded Withholding Tax provided for in Section 57 (B) of the Tax Code, as amended, and as implemented by Revenue Regulations No. 2-98, as amended. DETACa Further, you are requested to file on or before April 15 of each year, a Profit and Loss Statement and Balance Sheet with Annual Information Return under oath, stating the CMPC's gross income and expenses incurred during the year, and a Certificate showing that there has not been any change in the By-Laws and Articles of Cooperation, in its manner of activities, as well as resources and disposition of income. A copy of this Letter of Exemption must be attached to the Annual Information Return which you will file on said date. Finally, your Books of Accounts and other pertinent records shall be subject to periodical examination by Revenue Enforcement Officers of this Bureau for the purposes of ascertaining whether you have been complying with the conditions, under which you have been granted tax exemption or tax incentives and your tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. 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