Bureau of Local Government Finance Opinion

February 24, 1998 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully referred, thru the City Treasurer, to the Chief, Business Permits and Licensing Office, Mayor's Office, both of Caloocan City, the herein letter dated June 11, 1997 of Mrs. Arsenia Santiago, Manager, Bayanihan Sa Kaunlaran ng Sambayanan (BAKAS) Cooperative Development, Inc., requesting assistance relative to the assessment of business taxes and fees made by that Office on said cooperative. It appears that the said cooperative has been assessed as follows: Refuse Fee P550 Mayor's Permit on Occupation 30 Signboard Permit Fee 100 Building Inspection Fee 100 Electrical Inspection Fee 78 Mechanical Inspection Fee 30 Plumbing Inspection Fee 15 Billboard (Signboard) 60 Total P1,523 ===== Consistent with previous actions of this Bureau, it was emphasized that cooperatives are still liable to the payment of service charges or rental for the use of property and equipment or public utilities owned by the local government such as charges for actual consumption of water, electric power, toll fees for the use of public roads and bridges and the like. ESHAcI Accordingly, this Bureau finds that the fees being imposed are by nature, service charges as compensation for services actually rendered by the local government unit. However, signboard and billboards fees should not be imposed unless posted on property owned by that city. As regards the Mayor's permit, it may be emphasized that pursuant to BLGF Memorandum Circular No. 02-97 dated March 18, 1997, cooperatives duly registered under R.A. 6938 that transact business solely with its members are exempt from obtaining said 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. Accordingly, that Office in the issuance of Mayor's permit to BAKAS, may be guided on the basis of the exemptions granted to cooperatives which deal only with members and those who also deal with non-members under RA 6938 as follows: 1. Duly registered cooperatives which do not transact any business with non-members or the general public shall not be subject to any government taxes or fees imposed under the internal revenue laws and other tax laws. 2. Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions to members. 3. Cooperatives dealing with non-members 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. EAHDac 2. Cooperatives with accumulated reserves and undivided net savings of more than Ten million pesos (P10,000,000.00) shall pay the following taxes at the full rate: a) Income Tax On the amount allocated for interest on capitals; b) Sales Tax On sales to non-members; c) All other taxes unless otherwise provided herein. 3. All cooperatives, regardless of the amount of accumulated reserves and undivided net savings shall be exempt from payment of local taxes and taxes on transaction with banks and insurance companies: Provided , That all sales or services rendered to non-members shall be subject to the applicable percentage taxes except sales made by producers, marketing or service cooperatives. (SGD.) LORINDA M. CARLOS Executive Director