Publishing the pertinent provisions of Presidential Decree No. 175 Relating to Registered Cooperatives, Their Tax Exemption and Re-registration and Providing for the Repeal of All Past Cooperative Laws

October 17, 1974 REVENUE MEMORANDUM CIRCULAR NO. 60-74 SUBJECT : Publishing the pertinent provisions of Presidential Decree No. 175 Relating to Registered Cooperatives, Their Tax Exemption and Re-registration and Providing for the Repeal of All Past Cooperative Laws TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, there is published hereunder pertinent provisions of Presidential Decree No. 175 relating to registered cooperatives, their tax exemption and re-registration and providing for the repeal of all past cooperative laws, viz.: "Section 2. Cooperative Defined. Cooperative shall mean only organizations composed primarily of small producers and of consumers who voluntarily join together to form business enterprises which they themselves own, control and patronize. "A small producer shall mean a self-employed individual who, by himself or with his family provides the primary labor requirements of his business enterprise or one who earns at least fifty percent of his gross income from the payment proceeds or income of the labor he provides. "Section 5. Privileges of Cooperatives . Cooperatives shall enjoy the following privileges: "(a)Exemption from income taxes and sales taxes provided that a substantial portion of the net income of the cooperative is returned to members in the form of interests and/or patronage refunds; Provided , further , That for income tax purposes, non-agricultural cooperatives shall be exempt for a period of five (5) years and agricultural cooperatives for a period of ten (10) years reckoned from the date of registration with the Department of Local Government and Community Development; Provided, finally, that the taxable income shall mean that portion of the cooperative's income after deducting the interest paid to members and patronage refunds; xxx xxx xxx "Section 8. Powers of Regulatory Agency . The Department of Local Government and Community Development through the Bureau of Cooperatives Development is vested with full authority to promulgate rules and regulations to govern the promotion, organization, registration, regulation and supervision of all types of cooperatives. Specifically, it shall have the following powers: "(a)To call on any office, agency, instrumentality or individuals belonging to the government or private sector for such assistance as may be needed. "(b)To register new cooperatives, register existing cooperatives and regulate and supervise the following types of cooperatives: 1)Barrio Associations which shall have the provisional status of a cooperative and serve the requirements of Presidential Decree No. 27 in the issuance of certificates of land transfer; 2)Local or primary cooperatives which shall be composed of natural persons and/or barrio associations; 3)Federations which shall be composed of cooperatives which may or may not perform business activities; and 4)Unions of cooperatives which shall not perform any business activities. Provided, that, in the case of re-registration, the cooperative shall file its application or petition for re-registration within a period of six (6) months from the date of promulgation of this Decree, and its corporate existence shall be deemed to continue until the application or petition is approved or denied; and Provided , further , that for purposes of re-registration, Sections 2 and 5(a) hereof shall not be applicable to existing cooperatives which do not meet the qualification requirements provided for in this Decree. "Section 9. Penal Provisions . No person or group of persons other than cooperatives registered pursuant to the provisions of this Decree shall use in its name the word cooperative or its equivalent in the vernacular with intent to defraud. Violators shall be fined Two Thousand (P2,000.00) pesos. In case of insolvency, a subsidiary imprisonment of not more than six (6) months shall be imposed. "Section 11. Repealing Clause . All past cooperative laws are hereby repealed. Portions or parts of any other laws inconsistent herewith are likewise repealed. "The Department of Local Government and Community Development through the Bureau of Cooperatives Development shall promulgate within thirty (30) days from date hereof the rules and regulations for the effective implementation of this Decree and upon approval by the President of the Philippines shall have the force and effect of law. These rules and regulations may be amended, modified or abrogated as the circumstances may so demand. "Done in the City of Manila, this 14th day of April, in the year of Our Lord, nineteen hundred and seventy three. "(SGD.) FERDINAND E. MARCOS President Republic of the Philippines "By the President: (SGD.) ALEJANDRO MELCHOR Executive Secretary" FEATURES OF THE DECREE The term "cooperative" as defined has been broadened so as to include both non-agricultural and agricultural cooperatives, and emphasizes only organizations which are primarily composed of small producers and consumers. It also includes barrio associations in a provisional status. Small producers or consumers as mentioned in this Decree should be understood as referring only to individuals or natural persons in order to qualify for membership in a cooperative. A cooperative registered or re-registered under the provisions of the Decree shall be entitled to exemption from income taxes and sales taxes if a substantial portion of the net income of the cooperative is returned to the members in the form of interests and/or patronage refunds. Existing cooperatives re-registered under the Decree which have not met the qualification requirements provided for in this Decree are not, however, exempt from any tax. For income tax purposes, exemption is limited to five (5) years in the case of non-agricultural cooperatives and ten (10) years in the case of agricultural cooperatives counted from the date of their registration with the Department of Local Government and Community Development. Taxable income shall mean that income portion of the cooperative remaining after deducting the interest paid to the members and patronage refunds. Cooperatives registered under any of the cooperative laws existing at the time of the promulgation of this Decree are now required to file their application or petition for re-registration with the Department of Local Government and Community Development through the Bureau of Cooperatives Development within a period of six (6) months from April 14, 1973, date this Decree was promulgated, and until their application or petition is approved or denied, their corporate existence shall be deemed to continue. The use by a person or group of persons not otherwise registered pursuant to the provisions of this Decree of the word cooperative or its equivalent in the vernacular with intent to defraud is a violation punishable by a fine of P2,000.00 or by imprisonment of not more than 6 months in case of insolvency. EFFECTIVITY Presidential Decree No. 175 took effect on April 14, 1973, the date the same was promulgated by the President of the Philippines. REPEALING CLAUSE All existing cooperative laws whether agricultural or non-agricultural upon the effectivity of the Decree are deemed repealed. In effect, all tax exemptions granted under any of the said cooperative laws are considered revoked. ENFORCEMENT AND PUBLICITY All internal revenue officers and others concerned are hereby enjoined to be guided accordingly and to give this circular as wide a publicity as possible. MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5