Exemption Granted to Cooperatives by the Cooperative Code Does Not Apply to Taxes on Income Not Arising from Cooperative Productive Activity

August 21, 1991 BIR RULING NO. 162-91 24 (e) (1) 123-91 162-91 Gentlemen : This refers to your letter dated May 9, 1991 which was referred to this Office by the BIR Regional Director of Revenue Region No. 10-A relative to your request for exemption of your interest income on bank deposits from withholding tax under the provisions of PD 2008. In reply, please be informed that the tax exemption privileges granted to cooperatives by PD 2008 were withdrawn by Executive Order No. 93 which become effective on March 10, 1987. Although under Articles 61 and 62 of the Cooperative Code (R.A. No. 6938)cooperatives enjoy certain tax exemption privileges, their interest from Philippine currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements, and royalties derived from sources within the Philippines remain subject to the 20% final withholding tax under Section 24 (e) (1) of the Tax Code, as amended. This is so, because the exemption granted to cooperatives by the Cooperative Code does not apply to taxes on income not arising from cooperative productive activity. Accordingly, your aforesaid request is hereby denied. aisadc Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge