Whether a Cooperative is Exempt from Paying Local Taxes and Other Charges

February 20, 2008 DILG LEGAL OPINION NO. 007-08 Atty. Marc R.M. Navarro 25 C Perpetual Drive, Sta. Teresita Village Malanday, Marikina City Dear Atty. Navarro : This refers to your letter dated October 22, 2007 seeking our opinion on whether or not a cooperative is exempt from paying local taxes and other charges. As per your letter, the Sangguniang Panlungsod of Marikina City enacted Ordinance 165 series of 2004, exempting cooperatives only from certain fees imposed by the city government, except cooperatives with net assets of more than P10,000,000.00. Because of this, Barangka Credit Cooperative (BCC) was assessed of local taxes and/or fees for business and building permits and other charges. BCC paid but the same was made under protest because it believed that, as a duly registered cooperative, it should have been exempted from all local taxes and other charges. You now seek our opinion on the said issue. In response thereto, please be informed that in DILG Opinion No. 37, series of 2007 dated April 23, 2007, we opined that cooperatives shall be exempt from payment of local taxes, fees or charges imposed by provinces, cities, municipalities and barangays, provided however, that these cooperatives are duly registered under R.A. 6810 otherwise known as An Act Establishing the Magna Carta for Countryside and Barangay Business Enterprises, Granting Exemptives for any and all Government Rules, Regulations and other Incentive and Benefits therefore, and for other purposes and R.A. 6938 or the Cooperative Code of the Philippines. We found basis in Section 133 (n) of the Local Government Code of 1991, which reads: DaHSIT "Section 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. 6810 and Republic Act Numbered 6938, otherwise known as the "Cooperative Code of the Philippines" respectively." Significant from the aforequoted provision is the fact that there is no qualification as to the kind of cooperatives that should be given an exemption, providing only a lone condition that such cooperatives are duly registered under Republic Act No. 6810 and R.A. 6938. Likewise there is no distinction as to the local taxes, fees or charges that such cooperatives are exempt from paying. Thus, since the law did not distinguish, the local government unit cannot and should not also distinguish. As per your letter, since BCC is a duly registered cooperative in accordance with R.A. 6938 and 6810, we are of the view that it enjoys the exemption of local taxes, fees and charges as mandated by the provision cited above. Hope we have enlightened you on the matter. Very truly yours, (SGD.) AUSTERE A. PANADERO Undersecretary Department of Interior and Local Government ATTY. MARC R.M. NAVARRO Notary Public and Counselor-at-Law 22 October 2007 The Office of the Secretary Department of Interior and Local Government Francisco Gold Condominium EDSA, Quezon City Attention: Honorable Secretary Ronaldo Puno Dear Sec. Puno: I write in behalf of the Barangka Credit Cooperative (BCC for brevity) regarding the continued imposition by the Marikina City Government of fees/taxes for business permits and building permit of the BCC. For your ready reference and perusal, hereto attached are the application for business permit dated January 23, 2006 and the assessment for building permit dated May 18, 2007 (Annexes A and B) of the BCC. For these assessments, the BCC paid the aforesaid taxes as shown by Official Receipts (Annexes C and D). ITADaE However, the BCC made it clear that it paid said assessments under protest as per its letters of October 2, 2007 and October 8, 2007 (Annexes E and F) addressed to the Marikina City Government. The BCC's position is that as a duly registered cooperative under the Cooperative Development Authority dated August 11, 1986, with registration no. FF-357 CN-004-016, it is exempted from paying all forms of local business taxes and other non-taxes revenue source such as permit fees, service charges, license fees, sanitation fees and other charges being imposed by the local government units. As and by way of reference, jurisdictions like the Pasig City local government have passed ordinances exempting legitimate cooperatives from all taxes and fees and dues imposed by the city government (Annex G) thereby conforming to the Local Government Code and R.A. 6180 and 6938. It is in this light that we refer and call to your good office's attention Ordinance 165 Series of 2004 enacted by the Sangguniang Panlungsod of Marikina City which grants exemption only of certain fees imposed by the City Government, except cooperatives with net assets of more than ten million pesos (Annex H). Said Ordinance 165 lays down a distinction whence the law under R.A. 6180 and 6938 and the Local Government Code gives none. The Marikina City government levies its taxes on the BCC and other Marikina-based cooperatives under the provisions of said Ordinance 165. May we therefore request from the DILG its official stand/legal opinion as to the legality/validity of Ordinance 165 series of 2004 vis--vis the Local Government Code and R.A. 6180 and 6938 (the latter three being laws of national application) for the record and guidance of all concerned. Thank you and expecting your prompt reply, we remain, TAECSD Respectfully yours, (SGD.) Atty. Marc R.M. Navarro Legal Counsel