Exemption of Cooperatives from the Payment of Local Taxes, Fees and Charges

October 7, 2009 BLGF MEMORANDUM CIRCULAR NO. 031-09 TO : All Regional Directors for Local Government Finance; Metropolitan Manila Treasurers; City, Provincial and Municipal Treasurers; and Others Concerned SUBJECT : Exemption of Cooperatives from the Payment of Local Taxes, Fees and Charges For the information and guidance of all concerned, quoted hereunder are the provisions of RA No. 7160, otherwise known as the Local Government Code (LGC) of 1991 concerning the tax privileges of cooperatives duly registered with the Cooperative Development Authority (CDA): "SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: "xxx xxx xxx "(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperatives Code of the Philippines" respectively; . . . ." "SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax: "xxx xxx xxx; "(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; . . . ." The above provisions are supplemental to Articles 60 and 61 of R.A. No. 9520, otherwise known as the Philippine Cooperative Code of 2008 which states that: "ART. 60. Tax Treatment of Cooperatives. Duly registered cooperatives under this Code which DO NOT TRANSACT ANY BUSINESS WITH NON-MEMBERS or the general public shall not be subject to any taxes and fees imposed under the internal revenue laws and OTHER TAX LAWS. Cooperatives not falling under this article shall be governed by the succeeding section. "ART. 61. Tax and Other Exemptions. Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions with members. In relation to this, the transaction of members with the cooperative shall not be subject to any taxes and fees, including but not limited to final taxes on members' deposits and documentary tax. Notwithstanding the provisions of any law or regulations to the contrary, such cooperatives dealing within nonmembers shall enjoy the following tax exemptions: "(1) Cooperatives with accumulated reserves and undivided net savings of not more than Ten Million Pesos (P10,000,000.00) shall be EXEMPT FROM ALL NATIONAL, CITY, PROVINCIAL, MUNICIPAL OR BARANGAY TAXES OF WHATEVER NAME AND NATURE. . . . ." On the qualification that a cooperative should be duly registered with the CDA to be exempt from the payment of local taxes, fees and charges under Sections 133 (n) and 234 (d) of the LGC, Art. 144 of R.A. No. 9520 provides as follows: "ART. 144. Transitory Provisions. (1) All cooperatives registered and confirmed with the Authority under Republic Act No. 6938 and Republic Act No. 6939, are hereby deemed registered under this code, and a new certificate of registration shall be issued by the authority: Provided, That such cooperative shall submit to the nearest office of the authority a copy of their certificate of registration or certificate of confirmation, the articles of cooperation, their bylaws, and their latest audited financial statement within one (1) year from the effectivity of this code, otherwise they shall be deemed cancelled motu proprio. "xxx xxx xxx." However, cooperatives transacting business with both members and non-members are required to obtain or secure a Mayor's permit, which is implemented under the police power of the local government unit to protect public interest and in furtherance of the general welfare clause enshrined both in the Constitution and the Local Government Code (Section 16 General Welfare Clause), and pay the commensurate cost of regulation, inspection and surveillance of the operation of its business but not exceeding One Thousand Pesos (P1,000.00) . Likewise, said cooperatives shall secure a Community Tax Certificate (CTC) and pay the basic tax of Five Hundred Pesos (P500.00) as a juridical entity. In addition, said cooperatives are still liable to the payment of service charges or rentals for the use of property and equipment or public utilities owned by the local government such as charges for actual water consumption, electric power, toll fees for the use of public roads and bridges and the like. Strict observance of this Memorandum Circular is hereby enjoined. The Regional Directors for Local Government Finance are hereby instructed to disseminate the contents of this Circular to all Provincial, City and Municipal Treasurers within their respective jurisdiction for their information and guidance. (SGD.) MA. PRESENTACION R. MONTESA Executive Director