BIR Ruling No. 226-83

December 14, 1983 BIR RULING NO. 226-83 Gentlemen : This refers to your letter dated June 20, 1983 requesting exemption from the payment of internal revenue taxes under the provisions of Presidential Decree No. 175. The records show that Old Boso-Boso, Bo. San Jose Samahang Nayon, Inc. is a Samahang Nayon (Barrio Association) registered with the Bureau of Cooperative Development, Department of Local Government and Community Development under Certificate of Registration No. 065 dated December 27, 1983; that it is a non-profit organization formed for the purpose of assisting the barrio people of Boso-Boso, Antipolo Rizal in their farming operations and activities; and that under its articles of incorporation, it has among others, the following purposes: 1. To serve as a means of facilitating land transfer under the agrarian reform program by assisting government workers in determining the owners and tillers of the land, the area of farms, production during past years and other essential information pertinent to the consummation of the mandatory sale contract between owner and tiller; and also to act as a guarantor of the installment payments of amortizing owners; 2. To provide the medium through which different government agencies and private institutions may be able to serve a greater number of people in the most convenient and efficient manner; 3. To act as the coordinator in the assembly of farmers' produce intended for payment of loans, land amortization, irrigation fees or for outright sale to previously determined buyers, as well as in the distribution of supplies intended for farmers to facilitate transactions between the farmers on one hand and the concerned parties on the other; 4. To implement a planned thrift and savings program among its members and accumulate funds for specific purposes or projects; 5. To develop insights and skills necessary for effective and harmonious discussion and solution of common problems and conduct an effective and continuous cooperative education among its members; 6. To provide among the members experience in formal organization and self-government and to encourage participation of the members in community life and enhance community prosperity; 7. To provide the opportunities for members to learn, acquire and employ modern methods of crop farming, animal husbandry and other productive pursuits; and 8. To promote cooperative production among the members. In reply, please be informed that since the Old Boso-Boso, Barrio San Jose Samahang Nayon, 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: cdt "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 Samahang Nayon from income tax however, shall expire on December 27, 1983, or after ten (10) years from the date of its registration on December 27, 1973 pursuant to the aforequoted provision of P.D. No. 175. cdta Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue