Bureau of Local Government Finance Opinion

April 26, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Leticia L. Jayme Chief Operations Officer Co-ops for Christ Multi-Purpose Cooperative #2 Sta. Maria St. Cor. East Capitol Drive Barangay Capitolyo, Pasig City Madam : This refers to your letter January 27, 2010 opinion that Co-ops for Christ is exempt from local charges and dues. Representations are made that Co-ops for Christ is a multi-purpose cooperative duly registered under RA 6938 with the following business lines: 1. Lending 2. Pharmaceutical (Co-ops for Christ Botika ng Bayan) situated or located mostly in depressed areas in Quezon City, Caloocan City, Antipolo, Taytay, Cainta, Paraaque, San Juan, Las Pias and Pasig City. Having a botika as its second line of business, said cooperative transacts business with both members and non-members. It is claimed however, that despite being a cooperative, it is being assessed local charges and dues as follows: 1. Garbage Fee 2. Sanitary Inspection Fee 3. Environmental Inspection Fee 4. Fire Inspection Fee 5. Personnel Occupational Tax 6. Personnel Police Clearance 7. Personnel Health Certificate 8. Engineering Inspection Fees a. Building Inspection Fee b. Electrical Inspection Fee CAcDTI c. Plumbing Inspection Fee d. Mechanical Inspection 9. City 10. Zoning Fee 11. Tourism 12. Business Tax 13. Mayor's Permit Fee 14. Refuse Fee 15. Sanitary Permit Fee It is believed that as a cooperative with an accumulated reserve of P1,492,144.00 it shall not be liable to the above-mentioned charges as expressly stated in CDA MC No. 93-005 and BLGF MC No. 02-97, citing further Article 62 of the Cooperative Code of the Philippines, quoted as follows: "Cooperatives transacting business with members and non-members shall not be subject to tax on their transactions to members. Notwithstanding the provisions of any law or regulations to the contrary, such cooperatives dealing with non-members shall enjoy the following tax exemption: "(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, and BARANGAY TAXES OF WHATEVER NAME AND NATURE." In this connection, please be informed that R.A. 6938, otherwise known as the Cooperative Code of the Philippines has been amended under R.A. 9520 "An Act Amending the Cooperative Code of the Philippines to be Known as the 'Philippine Cooperative Code of 2008", pertinent provisions quoted as follows: "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. "ART. 61. Tax and Other Exemptions . Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transactions with members. In relation to this, the transactions 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 regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions: CIcEHS "(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. Such cooperatives shall be exempt from customs duties, advance sales or compensating taxes on their importation of machineries, equipment and spare parts used by them and which are not available locally as certified by the Department of Trade and Industry (DTI). All tax free importations shall not be sold nor the beneficial ownership thereof be transferred to any person until after five (5) years, otherwise, the cooperative and the transferee or assignee shall be solidarily liable to pay twice the amount of the imposed tax and/or duties. "(2) . . . "(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 transactions with banks and insurance companies: Provided, That all sales or services rendered for non-members shall be subject to the applicable percentage taxes except sales made by producers, marketing or service cooperatives: Provided, further, That nothing in this article shall preclude the examination of the books of accounts or other accounting records of the cooperative by duly authorized internal revenue officers for internal revenue tax purposes only, after previous authorization by the Authority. "xxx xxx xxx." In addition ART. 144 of R.A. 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." Accordingly this Bureau expresses the view that for as long as a cooperative is duly registered with the Cooperative Development Authority (CDA) under the provisions of R.A. 6938 and R.A. 9520, it shall remain exempt from the payment of local taxes. HaECDI It bears emphasis, however, that pursuant to BLGF Memorandum Circular No. 31-2009 dated October 7, 2009, copy enclosed, 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. (Emphasis supplied) 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 a 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. We hope that this will help clarify matters. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director