Withdrawal of All Tax Exemptions and Preferential Privileges

November 16, 1988 BIR RULING NO. 551-88 24 369-88 551-88 Gentlemen : This refers to your letter dated September 5, 1988 stating that you are a corporation established under P.D. No. 175 and duly registered with the Bureau of Cooperatives Development as full pledged cooperative of good standing with Certificate of Registration No. FF 563-RR dated August 8, 1985; and that one of your objectives is to provide and strengthen cooperative endeavor and extend assistance to members and non-members through credit scheme both in cash and in kind. Based on the foregoing representations, you now request in effect a ruling as to whether or not you are exempt from the following: 1. Payment of sales tax 2. Filing and payment of income tax 3. Withholding taxes from compensation of employees and savings account and time deposits of members. In reply, please be informed that Executive Order No. 93 which took effect on March 10, 1987 withdrew all tax exemptions and preferential privileges e.g., income tax and sales tax, granted to cooperative under P.D. No. 175 which were previously withdrawn by P.D. No. 1955 effective October 15, 1984 and restored by P.D. No. 2008 effective January 8, 1986. However, implementation of said Executive Order insofar as electric, agricultural, irrigation and waterworks cooperatives are concerned was suspended until June 30, 1987. (Memorandum Order No. 65 dated January 21, 1987 of the President) Accordingly, your tax exemption privilege expired as of June 30, 1987. Such being the case, you are now subject to income and sales taxes. Moreover, under Section 72(a) of the Tax Code, as amended, every employer making payment of wages shall deduct and withhold upon such wages a tax at the rates prescribed by Section 21(a) in relation to Section 71, Chapter X, Title II, of the same Code as amended by Batas Pambansa Blg. 135 and implemented by Revenue Regulations No. 6-82 as amended. Accordingly, as an employer you are required to withhold the corresponding tax due from the compensation of your employees. Furthermore, under Section 50(a) of the Tax Code, as amended, the tax imposed or prescribed by Section 21(c) of the same Code on specified items of income shall be withheld by payor-corporation and/or person and paid in the same manner and subject to the same conditions as provided in Section 51 of the Tax Code, as amended. Such being the case, and since interest from any Philippine currency bank deposit and yield or any other monetary benefit from deposit substitutes are paid by banks, you are not the party required to withhold the corresponding tax on the aforesaid savings account and time deposits of your members. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner