Withholding of te One Percent (1%) Creditable Tax Prescribed in Revenue Regulations No. 12-94 Does Not Apply to Income Payments Made to Mana Foundation Multi-Purpose Cooperative, Since it is Enjoying Exemption from Payment of Income Taxes pursuant to the Cooperative Code

February 4, 1997 BIR RULING NO. 014-97 RR 12-94 000-00 14-97 Mana Foundation Multi-Purpose Cooperative Poblacion, Tangcal Lanao del Norte Attention: Mr . Mambaya M . Malo Managing Director Gentlemen : This refers to your letter dated August 5, 1996 requesting for a ruling on your exemption from the one percent (1%) withholding tax as provided for under Revenue Regulations No. 12-94 on your sale of copra to various big corporations within that area. It is appears that you are a multi-purpose cooperative engaged among other things, in the selling of copra; that you were issued with a Certificate of Registration No. RN-0383-KEO by the Cooperative Development Authority (CDA); and that you were issued a certificate of exemption by this office exempting you from the payment of all taxes, including income tax and fees imposed under the internal revenue laws and other tax laws, pursuant to Article 61 of the Cooperative Code, that however, you shall be liable to the value-added tax (VAT) imposed in Sections 100 to 102 of the Tax Code, as amended by Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax (EVAT) Law, if in the course of trade or business, you sell, barter, exchange, lease goods or properties, render services and import goods, that also, you should pay the 10% VAT billed to you on your purchase of goods and/or sale of services because said tax is an indirect tax which can be passed on or shifted as part of the cost of the goods sold/services rendered, that your interest income from Philippine currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements and royalties derived from sources within the Philippine shall be subject to the 20% final tax imposed under Section 24(e)(1) of the Tax Code, as amended, and that you shall also be taxed on prizes, winnings and the net gains realized on sales or exchange of property. In reply, please be informed that pursuant to Section 4 of Revenue Regulations No. 12-94, which provides, viz: "SEC. 3. Section 4 of Revenue Regulations No. 6-83 is hereby amended to read as follows: "Section 4. Exemption from Withholding . The withholding of tax prescribed in these regulations shall not apply to income payments in the following cases: " (a) . . . " (b) Income payments to 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 : "1. . . . "2. . . . "3. Etcetera xxx xxx xxx "(e) In general exemption from withholding tax shall be allowed only if the payee has furnished to the payor a copy of a Certificate of Exemption from withholding tax issued by the Commissioner of Internal Revenue. However this rule shall not apply in cases falling under the preceding paragraphs (a) and (b) (1) of this Section." The withholding of the one percent (1%) creditable tax prescribed in the regulations shall not apply to income payments made to cooperatives, since cooperatives are enjoying exemption from payment of income taxes pursuant to the provisions of Article 61 of the Cooperative Code, which is a special law. Accordingly, the withholding of the one percent (1%) creditable tax prescribed in Revenue Regulations No. 12-94 does not apply to income payments made to the Mana Foundation Multi-Purpose Cooperative, since it is enjoying exemption from payment of income taxes pursuant to the provisions of Article 61 of the Cooperative Code. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue