BIR Ruling No. 195-15

June 10, 2015 BIR RULING NO. 195-15 RA 9520; 000-00 Workers Cooperative of Emerald Mountain Brgy. Kias, Baguio City Attention: Leoncio D. Na-Oy BOD-Chairman Gentlemen : This refers to your letter dated October 25, 2011 duly indorsed by Revenue Region (RR) No. 2-Baguio City, requesting for a confirmation that sale of gold by Workers Cooperative of Emerald Mountain (WCEM) to the Central Bank is exempt from Excise Tax. Documents submitted disclosed that WCEM, with Tax Identification Number 408-861-180-000, is a primary workers cooperative duly organized under the laws of the Philippines; that it is registered with the Cooperative Development (CDA) under Registration No. 9520-15019642 dated May 20, 2011; that the purposes for which it was formed are to provide employment and business opportunities to its members and manage it in accordance with cooperative principles; and that on August 16, 2011, WCEM obtained a certificate of tax exemption (CTE) from RR No. 2-Baguio City as a cooperative transacting with members only with CTE No. COOP-00124-11-RR-02-RDO-08, thus entitled to the following tax exemptions and incentives provided by Article 60 of Republic Act No. 9520, as implemented by Section 7 of the Joint Rules and Regulations Implementing Articles 60, 61 and 144 of RA No. 9520: 1. Exemption from Income tax on income from CDA-registered operations; 2. Exemption from Value-added tax on CDA-registered sales or transactions; 3. Exemption from other Percentage tax; 4. Exemption from 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; 5. Exemption from Excise tax for which it is directly liable; 6. Exemption from Documentary stamp tax: Provided, however , that the other party to the taxable document/transaction who is not exempt shall be the one directly liable for the tax; 7. Exemption from payment of Annual Registration fee of Five hundred pesos (P500.00); 8. Exemption from all taxes on transactions with insurance companies and banks, including but not limited to 20% final tax on interest deposits and 7.5% final income tax on interest income derived from a depositary bank under the expanded foreign currency deposit system; and n CAacTH and that WCEM is requesting the issuance of a letter to Central Bank, Baguio Branch, confirming application of its tax exemption on the sale of gold it produced. In reply, please be informed that pursuant to Section (Sec) 9 of the Joint Rules and Regulations implementing Republic Act No. 9520, as circularized by Revenue Memorandum Circular No. 12-10 dated February 5, 2010, provides: " SECTION 9. Taxability of Unrelated Income of Cooperative. Notwithstanding the foregoing, all income of cooperatives not related to the main/principal business/es under its Articles of Cooperation shall be subject to all the appropriate taxes under the NIRC, as amended . This is applicable to all types of cooperatives whether dealing purely with members or both members and non-members ." (emphasis supplied) Based on the foregoing, though cooperatives are exempt from certain taxes, nevertheless, exemption from excise tax of the WCEM's transaction on the sale of gold to Central Bank is not among those exemptions granted by law as engaging in mining or small scale mining operations that produce gold is not related to the cooperative's principal business. It should be remembered that laws and statutes granting tax exemptions are strictly construed against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable doubt. 1 In the case of Mactan Cebu International Airport Authority v. Marcos , 2 the Supreme Court held: ''Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting the exemptions are thus construed strictissimi, juris against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception." In view of the foregoing, this Office holds that WCEM is liable to excise tax on the sale of gold to Central Bank. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Dimaampao, Japar B., Tax Principles and Remedies, Second Edition (2005). 2. G.R. No. 120082, 11 September 1996, 261 SCRA 667. n Note from the Publisher: Copied verbatim from the official copy.