Tax Exemption Privileges of St. Jude Multi-Purpose Cooperative of Lucena City

September 16, 2016 BLGF OPINION NO. 026-2016 CO-LFPS-PPPSD Mr. Ray R. Elevazo Executive Director Cooperative Development Authority Department of Finance 827 Aurora Blvd., Service Road Brgy. Immaculate Conception 1111 Cubao, Quezon City SUBJECT : Tax Exemption Privileges of St. Jude Multi-Purpose Cooperative of Lucena City Dear Mr. Elevazo : This has reference to your letter dated 22 June 2016 seeking clarification on the alleged conflicting opinion of this Bureau on the local tax exemption privileges of cooperatives, particularly that of St. Jude Multi-Purpose Cooperative (SJMPC) of Lucena City. HTcADC This Bureau, under its 2nd Indorsement dated 05 January 2016, relative to the letter dated 10 October 2015 of the ICO City Assessor of Tayabas, Quezon, stated that: "In this regard, it is the considered opinion of this Bureau that St. Jude Multi-Purpose Cooperative shall only enjoy exemption from payment of real property tax provided that its accumulated reserves and undivided net savings shall not exceed the amount of Ten Million Pesos (Php10,000,000.00)." The said Opinion was rendered based on the representations made and documents presented by the ICO City Assessor of Tayabas, as contained in the 1st Indorsement dated 20 October 2015 to this Bureau. However, upon careful perusal of the documents you submitted, particularly the Tax Exemption Certificate dated January 27, 2016 issued by the Bureau of Internal Revenue, Office of the Regional Director, Revenue Region No. 9, San Pablo City, this Bureau was clarified that SJMPC transacts its business exclusively with its members. In view thereof and by operation of law, particularly Article 60 1 of Republic Act No. 9520 entitled "An Act Amending the Cooperative Code of the Philippines to be known as the 'Philippine Cooperative Code of 2008,'" it would appear that SJMPC is not subject to any taxes and fees imposed under the internal revenue laws and other tax laws. Since the representation is that the said cooperative deals exclusively with its members, the provisions under Article 61 of the said law, which governs those cooperative transacting business with both members and non-members, would not apply in determining the taxability of the said cooperative. Premises considered, it is our view that, irrespective of the amount of accumulated reserves and undivided net savings, the SJMPC enjoys the tax exemption privileges afforded to it by law. However, it is reiterated that said cooperative and all cooperatives registered with the Cooperative Development Authority are required to secure Mayor's permit and Community Tax Certificate, and pay the corresponding fees provided under BLGF MC No. 31-2009, which was reinstated under BLGF MC No. 58-2012 dated 20 August 2012, thus: "xxx . . . 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 powers of a 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 corresponding fee of not exceeding One Thousand Pesos (P1,000.00), which commensurate to the cost of regulation, inspection and surveillance of the operation of its business. 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." Further, it is respectfully informed that this Bureau, through a letter of even date addressed to the City Treasurer of Tayabas City, instructed to verify the actual transactions of SJMPC. The instruction was given to determine the veracity of SJMPC's representation that it is doing business exclusively with its members. Once the examination is concluded, a report together with the supporting documents must be submitted the soonest possible time to this Bureau. Thus, this opinion is rendered without prejudice to the outcome of the examination to be conducted by the Office of the City Treasurer of Tayabas City. If the exclusivity of the transactions of the cooperative is proven to the contrary, then the appropriate tax treatment would be applied accordingly. aScITE We hope that we have clarified matters. Very truly yours, (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director Footnotes 1. ART. 60. Tax Treatment of Cooperative. 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.