Request for Tax Exemption by Minalin Poultry & Livestock Raisers Cooperative

April 27, 1984 BIR RULING NO. 083-84 201-f-000-00-083-84 Gentlemen : This refers to your letter dated August 26, 1981 requesting exemption from the payment of internal revenue taxes under the provisions of P.D. No. 175. The records show that the Minalin Poultry & Livestock Raisers Cooperative Marketing Association, Inc. is a cooperative of livestock and poultry raisers of Minalin, Pampanga, duly registered and existing in accordance with the cooperative laws of the Philippines; that the purpose for which it was organized is in accordance with the provisions of Presidential Decree No. 175; that under its articles of incorporation, it has among others, the following purposes: 1. To acquire, handle and market livestock and poultry produced by its members or any of the products derived therefrom; 2. To engage in any activity in connection with the production, hauling, storing, processing, marketing, selling, preserving, manufacturing, canning, packing, grading, handling, or utilization of any of the aforesaid products produced and delivered to it by its members or in the manufacturing or marketing of the by-products thereof; 3. To encourage diversified agriculture and improve rural community living; and 4. To promote education in the principles and practices of cooperative production, marketing, credit and financing. and that at the end of each fiscal year, its net income is distributed in the following manner: (a) 10% is set aside for cooperative education and training, which amount shall form part of the operating expenses of the cooperative; (b) 10% is set aside as General Reserve Fund; (c) Interest on capital; (d) Patronage refund; (e) Management bonus; and (f) Others as may be required by law. Investigation conducted by examiners of this Office disclosed that the Minalin Poultry & Livestock Raisers Cooperative Marketing Association, Inc. is exclusively engaged in the manufacture of feeds; that the manufactured feeds are sold solely and exclusively to bonafide members of the cooperative and not sold or channeled to any non-member, market or outlet; that it was formed as a cooperative marketing association under Republic Act No. 3425 with its Articles of Incorporation and By-Laws duly filed with the Securities and Exchange Commission on June 11, 1971; that the cooperative was duly registered with the Bureau of Cooperatives Development on June 9, 1981 under Certificate of Registration No. 111-FF-002-RR in accordance with Presidential Decree No. 175 and that the composing members of the cooperative are small producers with poultry farms mostly of backyard projects attended to be immediate members of their families. In reply, please be informed that since the Minalin Poultry and Livestock Raisers Cooperative Marketing Association, Inc. has complied with the requirements of an agricultural cooperative under the provisions of Presidential Decree No. 175, it is exempt from the payment of income and sales taxes pursuant to Section 5(a) of the said Decree which provides as follows: "SEC. 5. Privileges of Cooperatives Cooperatives shall enjoy the following privileges: "(a) Exemption from income taxes and sales taxes provided that a substantial portion of the net income of the cooperative is returned to members in the form of interests and/or patronage refunds; Provided, further , that for income tax purposes, non-agricultural cooperatives shall be exempt for a period of five (5) years and agricultural cooperatives for a period of ten (10) years reckoned from the date of registration with the Department of Local Government and Community Development; Provided, finally , that the taxable income shall mean that portion of the cooperative's income after deducting the interest paid to members and patronage refunds." The exemption of the Cooperative from income tax however, shall expire on June 9, 1991, or after ten (10) years from the date of its registration on June 9, 1981 pursuant to the aforequoted provision of P.D. No. 175. adc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner