Bureau of Local Government Finance Opinion

March 21, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 3rd Indorsement Respectfully returned, thru the Regional Director, Region XII, corner Corcuerra and Lim Sr. Streets, Cotabato City, to the Provincial Treasurer of Lanao del Norte, City of Iligan. This refers to the 1st indorsement dated November 8, 1996 of that Office, requesting opinion whether the Lanao del Norte Electric Cooperative Inc., (LANECO) is exempt from payment of the franchise tax. It appears that on October 15, 1996, that Office sent a demand letter to the Manager of LANECO collecting the payment of franchise tax covering the years 1993 to 1996 equivalent to 50% of 1% of the gross annual income receipts of the preceding year. In response, LANECO claimed that electric cooperatives which are non-stock and non-profit corporations are tax-exempt. In this connection, it is informed that the Department of Finance has expressed a uniform view on previous similar cases concerning exemption of cooperatives. For so long as a cooperative is duly-registered with the Cooperative Development Authority (CDA) under the provisions of RA 6938, it shall remain exempt from the payment of local taxes. It was emphasized, however, that the exemption enjoyed by such cooperatives does not include payment, of service charges or rentals for the use of property and equipment or public utilities owned by local governments such as charges for actual consumption of water, electric power, toll fees for use of public roads and bridges, and the like. EScAHT In addition, the CDA, under a letter dated January 28, 1997 opined that cooperatives duly registered under R.A. 6938 that transact business solely with its members are exempt from obtaining the mayor's permit. However, duly registered cooperatives which transact business with non-members are required to obtain said mayor's permit but are exempt from paying the fee corresponding to such permit. Be guided accordingly. (SGD.) LORINDA M. CARLOS Executive Director