BIR Ruling [UN-227-94]

July 26, 1994 BIR RULING [UN-227-94] Commission on Elections Intramuros, Manila Attention: Atty . Romel L . Cecilio Legal Officer III Administrative Services Dept. Gentlemen : This refers to your follow-up letter dated March 28, 1994, requesting a ruling on the following question posed by you in you letter of February 21, 1994, viz: "Is a Cooperative, duly registered with Cooperative Development Authority (CDA), which leases office space to a government agency and is exempted from payment of all national, city, provincial, municipal or barangay taxes under Art. 62(1) of R. A. 6938 or the "Cooperative Code of the Philippines" automatically exempted as such or does it have to apply for exemption with the Bureau of Internal Revenue?" cdtech In reply, please be informed that pursuant to Revenue Memorandum Circular No. 48-91, a cooperative claiming exemption from taxes under either Article 61 of Article 62 of R.A. 6938 otherwise known as the Cooperative Code of the Philippines, must first file with the Bureau of Internal Revenue (BIR) a letter-application to be signed by the President/General Manager or his duly authorized representative, attaching thereto the following documents, viz: (1) Articles of Cooperation and By-Laws; (2) Certificate of Registration with the Cooperative Development Authority (CDA); (3) Certificate under oath by the President/General Manager that the Cooperative is/is not transacting business with non-members; (4) Certification under oath by the Chairman/President/General Manager of the Cooperative (if previously registered under P.D. 175, P.D. 775 and E.O. 898) as to the amount of accumulated reserves and undivided net savings and that at least 25% of the net income is returned to the members in the form of interest and/or patronage refund; and (5) Latest Financial Statement duly audited by an independent CPA. If all the papers are found to be in order, then a Certificate of Tax Exemption will be issued by the BIR indicating the period within which such exemption shall be effective. Only then will the cooperative be entitled to the tax exemption privileges granted to it by R.A. 6938. It is, therefore, our opinion that without a Certificate of Tax Exemption, King Development Cooperative is not entitled to avail of the tax exemption privileges granted to it by the Cooperative Code of the Philippines. Such being the case, your monthly rental payment of P12,000.00 to the said Cooperative for the use of a building by your Region IX Office in Davao City is subject to the 5% expanded withholding tax, pursuant to Revenue Regulations No. 6-85, as amended. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue