Press Release
January 25, 2010

Tax exemption rules for cooperatives approved

The Joint Congressional Oversight Committee on Cooperatives on Monday approved the Implementing Rules and Regulations (IRR) that would lay down the guidelines for the grant of tax exemptions to cooperatives nationwide, Senate Majority Leader Juan Miguel Zubiri announced.

Zubiri, primary author of the new Philippine Cooperative Code of 2008 and who is the chairman of the JCOCC, said the Joint Rules and Regulations would now allow cooperatives in the country to better serve their members, without worry of restraints due to lack or shortage of funds.

"This is good news for 75,000 cooperatives all over the country. They have long been waiting for these guidelines so they could operate more freely and easily, without worrying about financial resources," he said.

The joint rules and regulations, he said, are a product of the combined efforts of the Bureau of Internal Revenue (BIR) and the Cooperative Development Authority (CDA) in compliance with the provisions of the Philippine Cooperative Code of 2008.

Among others, the Joint IRR elaborates on the tax exemptions of the different categories of cooperatives, particularly duly registered cooperatives which transacts with members only and duly registered cooperatives which transact business with members and non-members.

Under the IRR, all duly-registered cooperatives enjoy exemption from transactions with insurance companies and banks.

Also, cooperatives dealing exclusively with members are exempt from payment of any taxes and fees, including but not limited to, income tax, percentage tax, donor's tax, excise tax, documentary tax, and the annual registration fee of P500.

Electric cooperatives are also exempt from payment of Value Added Tax (VAT) on systems loss and VAT on the distribution of electricity to their members.

Cooperatives doing business with members and non-members with accumulated reserves and undivided net savings of not more than P10 million are exempted from the same taxes as those that deal with members only.

Likewise, business transactions with members of duly registered cooperatives which have accumulated reserves and undivided net savings of more than P10 million are exempted from all national internal revenue taxes for which it is liable.

On the other hand, duly registered cooperatives with accumulated reserves and undivided net savings of more than P10 million dealing with non-members shall pay their income taxes and VAT at their full rate, subject to some exemptions.

VAT, will not be collected against sales by agricultural cooperatives, including sales to non-members, importation of direct farm inputs, machineries and equipment, including spare parts, to be used directly and exclusively in the production and/or processing of their produce; gross receipts from lending companies by credit or multi-purpose cooperatives; and sales by non-agricultural, non-electric and non-credit cooperatives.

The Joint IRR also elaborates on the requirements to be submitted and the procedure to be followed by the cooperatives to obtain a new certificate of tax exemption from the BIR and the renewal of the same.

"This will be very beneficial to the cooperatives industry," Zubiri said, "I congratulate all those who worked hard for the completion of these guidelines."

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