Tax Clearance and Certification

September 12, 1960 BIR RULING NO. 386-60 Ilocos Sur-Abra Federation of FaCoMas, Inc. Vigan, Ilocos Sur Attention : Mr . Higino T . Farinas President Gentlemen : This is with reference to your letter dated September 5, 1960, requesting a tax clearance and a certification to the effect that your "Federation of FaCoMas" are exempt from the payment of income tax and other taxes in accordance with Act No. 3425, in relation to Republic Act No. 821, as amended. It appears that your Federation is composed of FaCoMas in the provinces of Ilocos Sur and Abra: that said FaCoMas are organized under the provisions of Act No. 3425 and duly affiliated with the ACCFA in accordance with the provisions of Republic Act No. 821, as amended; and that the purposes, among others, of the Federation is "to pool the resources of the individual cooperative marketing associations so as to strengthen their bargaining power in the marketing of the produce of their members as well as in the purchase of the things needed by said members." Under the facts above-presented, the Federation may be exempt from the income tax, merchant's sales tax, and all other percentage taxes of whatever nature and description. Please note that the taxes herein enumerated exclude all other taxes, such as documentary and residence taxes. While it may be true that said Federation is presumed to be exempt from said taxes provided by law, this Office, however, is not aware (no evidence available) that said Federation and its FaCoMa members are operating within the scope of Act No. 3425, as amended. It is general principle mere organization and registration of a corporation in accordance with Act No. 3425 do not carry with it an outright grant of tax exemption of its operation or actual business activities. In other words, tax exemption privileges may be availed of by the Federation only when its business operations are pursued in accordance with law. A tax clearance certificate (which is temporary in nature), however, may be issued by this Office after due compliance with the requirements of Revenue Regulations No. 39, as amended. The tax Clearance Section of this bureau, Finance Bldg., Manila, of the Provincial Revenue Office of Ilocos Sur may be consulted on this matter for your guidance. cdtech Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue