Atty. Antonette P.

Clamor
Legal Officer III

Bureau of Internal Revenue

Archbishop Reyes Ave., Cebu City
Tel. No. 232-5546
Cel No. 09173217206
Objective/Purpose:
 To update/review and clarify issues
relative to :
 LEGAL BASIS OF TAX EXEMPTION OF COOPERATIVES
 PROCEDURES ON THE PROCESSING /EVALUATION OF
APPLICATIONS FOR CTE
 TAXABILITY /EXEMPTION OF COOPERATIVES AND ITS
MEMBERS
 RECENT BIR RULINGS/REVENUE REGULATIONS AND COURT
DECISIONS RELATIVE TO RA9520
 REPUBLIC ACT 9520
 “PHILIPPINE COOPERATIVE CODE OF 2008”
 Approved/sign into law April 6, 2009
 Published March 7, 2009
 Effectivity March 22, 2009

 RMC 12-2010 (Joint Implementing Rules on RA

9520)
 Effectivity June 16, 2010
 RA 9520
 Section 18. Transitory Provisions.- (1) All cooperatives
registered and confirmed with the Authority under
Republic Act No. 6938 and 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 by
laws, and their latest audited financial statement
within one (1) year from the effectivity of this code,
otherwise they shall be deemed cancelled motu
proprio.
Section 144 (2) of RA 9520
 Following the issuance of the new certificate of
registration, the registered cooperative shall secure
their certificate of tax exemption from the nearest
BIR office : Provided, that such exemption shall be
valid for five (5) years from date of issue xxxxxxx”
 That the BIR and CDA shall jointly issue the necessary
regulations on this exemption within ninety (90) days
from the effectivity of RA 9520.
 It is only after a cooperative has secured a new
Certificate of Registration with CDA under RA 9520
that cooperative becomes eligible to apply for a
Certificate of Tax Exemption (CTE) with the BIR.
(Sec.4 of RMO 76-2010)
No. of Coop granted Tax Exemption Certificate (CTE)
by BIR Revenue Region No. 13 as of Sept. 30,2015
No. of Registered Coop No. Coop. with CTE Issued
under RA 9520 by BIR

 Cebu Province 631 194

 Bohol province 622 209
 Cebu City North 157 35
 Cebu City South 85 38

 Total 1,495 476

Tax Exemption of Coops Registered with
CDA
 A law granting tax exemption is strictly construed
against the person or entity claiming exemption
 The burden of proving tax exemption rests upon the
taxpayer claiming tax exemption.
IF NO CTE Cooperative is subject to :
 Income TAX
 VAT
 Excise Tax
 Percentage Tax
 Annual registration Fee P500
 Documentary Stamp tax
 Final tax 20% interest income deposit and 7.5%
EFC
 VAT on revenues on system loss and revenues on
distribution, supply and transmission of electricity
to members
TAXABILITY OF COOPERATIVES
 All income of cooperatives not related
to main/principal business under its
Articles of Cooperation shall be
subject to all appropriates taxes.
(Sec. 9 of RMC 12-2010)
Implementing Rules and Issuances on
RA 9520
• 1. Revenue Memorandum Circular No. 12-2010
(Circulating the full text of Joint Rules and Regulations Implementing Articles 60, 61 and
144 of R.A. No. 9520) – effective June 16, 2010

• 2. Revenue Memorandum Order No. 76-2010

(Policies and Guidelines in the Issuance of Certificate of Tax Exemption of
Cooperatives and Monitoring thereof)- effective September 27, 2010
 3. Memorandum Order dated June 9, 2011– Deputy
Commissioner Nelson Aspe – Processing of tax exemption
 4. Revenue Memorandum Circular 12-2012 –
March 12, 2012 -Not to issue certificate of registration to
cooperatives engaged in construction, mining, labor contracting ,
professionals and other similarly situated cooperatives
I. MEMORANDUM ORDER Dated June 9, 2011 of Deputy
Commissioner Nelson M. Aspe
 All duly registered cooperative under RA 9520 shall
apply for a Certificate of Tax Exemption within sixty
(60) days counted from the date of issuance of
certificate of registration. (Sec 13 of RMC 12-23010)
 For application for tax exemption not filed within the
prescribed period, the late applicant shall be
subjected to internal revenue taxes prior to
issuance of the issuance of the Certificate of Tax
Exemption (CTE). (Sec. 13 of RMC 12-2010)
 MEMORANDUM ORDER dated June 9, 2011- Deputy
Commissioner NELSON ASPE
 IF DATE OF ISSUE CDA REGISTRATION Date CTE Application
with BIR
 April 6, 2009 to June 15, 2010 = on or before Aug.15, 2010
 June 16, 2010 onwards = within 60 days from
date registration
 Otherwise subject to Section 13 of RMC 12-2012 Joint
Implementing Rules
 - that for late applicants it shall be subjected to all internal revenue
taxes prior to the issuance of the Certificate of Tax Exemption/Ruling.
II. RMC 12-2012 dated March 12, 2012
 Non-registration of Cooperatives not specifically
identified under RA 9520
 Publishing CDA memorandum order to refrain from
issuing Certificate of Registration and to recall or
cancel those already issued to those organization not
identified under RA 9520 such as :
 Labor Contracting
 Professionals
 Construction
 Mining and other cooperatives similarly created
MEMORANDUM ORDER DATED
MARCH 7, 2017 OF CIR DULAY
 THE RDS AND RDOS ARE HEREBY DIRECTED TO
PROCESS AND ISSUE THE CTEs PROVIDED
COOPERATIVES COMPLY WITH RMO 76-2010, NO
DOCUMENTS OTHER THAN THOSE STATED IN
THE SAID RMO SHALL BE ASKED FOR THE
APPLICANTS.
 WITH RESPECT TO THE REQUIREMENT OF TIN OF
THE COOPERATIVE MEMBERS, THE CTE SHALL BE
ISSUED WITHOUT THE TIN OF THE MEMBERS
PROVIDED THE COOPERATIVES SHALL SUBMIT
WITH 6 MONTHS FROM THE ISSUANCE OF CTE
MEMO ORDER OF DEPUTY
COMMISSIONER JESUS CLINT
ARANAS DATED FEB. 24, 2017
 ACCORDINGLY SERVICE COOPERATIVES THAT
FULLY COMPLY WTH THE GUIDELINES OF CDA
UNDER MC NO. 2012-11 (PROFESSIONALS); MC NO.
2012-12 (REGISTRATION OF LABOR SERVICE); MC
NO. 2012-13 (REGISTRATION OF HEALTH SERVICE);
AND MC NO, 2012-14 (REGISTRATION OF SMALL
SCALE MINING) MAY BE GIVEN TAX EXEMPTION
CERTIFICATE PROVIDED THAT THEY ALSO
SUBMIT DOCUMENTS REQUIRED BY THE BIR
UNDER RMO 76-2010
MEMORANDUM OF DEPUTY
COMMISSIONER JESUS CLINT
ARANAS DATED FEB, 24, 2017
 IT IS OUR POSITION THAT SERVICE
COOPERATIVE MUST NOT BE TOTALLY
PROHIBITED UNDER RA 9520 FROM VAILING OF
THE TAX INCENTIVES PROVIDED THAT THEY ARE
REGISTERED WITH CDA AND HAVE BEEN ISSUED
CERT OF GOOD STANDING, PROVIDED THAT
THESE COOPERATIVE WILL BE SUBJECTED TO
POST AUDIT VERIFICATION CHECK WHETHER
THEY ARE BEING USED AS TAX SHIELD TO AVOID
OR EVADE TAXES.
III. Revenue Memorandum Order 76-2010
Policies and Guidelines in the Issuance of Certificate of Tax Exemption of Cooperatives
and Monitoring thereof)- effective September 27, 2010

 All cooperatives registered with the CDA under RA

9520 are mandated to update their registration
information with the BIR
 A cooperative applying for tax exemption shall be
required , as a condition for the issuance of Certificate
of Tax Exemption, to update its BIR Registration
with the Revenue District Office (RDO) having
jurisdiction over the cooperative’s place of
business.
Documentary Requirements for Original Issuance of
CTE under Section 5 (a) of RMO 76-2010
 BIR Form 1945 together with Certified True Copies
of :
 1. CERTIFICATE OF REGISTRATION with CDA UNDER RA 9520;
 2. LATEST ARTICLES OF COOPERATION AND BY LAWS;
 3. CURRENT CERTIFICATE OF GOOD STANDING;
 4. BIR Certificate of Registration
 Additional requirement
 5. Certificate under oath of the List of cooperative members with
their respective TIN and Capital contribution prepared by
authorized official of the cooperative.
Documents needed for the Renewal of tax exemption
under Section 5 (B) of RMO 76-2010
 Duly accomplished BIR Form 1945 with Certified
True Copies of the following :
 1. CERTIFICATE OF REGISTRATION with CDA under RA 9520;
 2. LATEST ARTICLES OF COOPERATION AND BY LAWS;
 3. CURRENT CERTIFICATE OF GOOD STANDING;
 4. LATEST FINANCIAL STATEMENT OF THE IMMEDIATELY PRECEDING
YEAR DULY AUDITED BY A BIR ACCREDITED INDEPENDENT CPA
Processing of CTE
 Submit all documents to the Revenue District Office having
jurisdiction over the principal place of business of cooperative
instead of the National Office.
 RDO SHALL REFUSE TO ACCEPT APPLICATION NOT
SUPPORTED BY COMPLETE DOCUMENTS ( Section 4 RMO 76-
2010)
 If all documents are complete and in order the Revenue Officer of
the Day shall prepare the Pre-evaluation sheet and Memo
Indorsement Form and shall transmit within five (5) working days
from the filing of the duly accomplished BIR Form 1945 together with
the required documents to the Regional Director through, Chief, Legal
Division. (Sec 6 RMO 76-2010)
Processing documents
 Review by the Legal Division and Approval Regional
Director of Tax Exemption Certificate = 5 days
Validity Certificate of tax Exemption (CTE)
 Certificate of Tax Exemption is valid for a period of
five (5) years from the date of issue;
 However for the initial issuance of CTE under RA
9520, the effectivity of such CTE issued shall
commence from the year RA 9520 took effect:
Provided, that the cooperative has registered with CDA
as provided for under Article 144 of RA 9520.
Renewal Certificate of Tax Exemption
Application for renewal shall be
filed at least two (2) months prior
to the date of expiration of existing
CTE.
VERIFICATION OF ANNUAL INFORMATION RETURN/INCOME
TAX RETURN, FINANCIAL STATEMENTS, ATTACHMENTS AND
RECORDS

 The books of accounts and other pertinent records, as well

as the operations of all cooperatives, maybe examined by
the BIR annually for purposes of ascertaining compliance
with conditions under which they have been granted tax
exemption by the BIR, only after authorization by the CDA
or its extension office having jurisdiction over the
cooperative copy furnished cooperative concerned, within
twenty days from the receipt of the request from BIR .
(Section 16 of RMC 12-2010)
GROUNDS FOR REVOVATION OF CTE
 Failure to submit yearly on or before April 15 after the close
of the calendar year the following, any of the following
documents :
 1. Annual Information Return (BIR Form 1702)
 2. Certificate of Good Standing;
 3. Certificate under oath by the Chairperson/General Manager stating the
following: Amt. of accumulated Reserves /net surplus; The type/category of
cooperative and principal activities/business ; transacting business with members only
or both members and non-members; that at least 25% of the net surplus is returned to
the members in the form of interest on share capital and/or patronage refund;
 4. Original copy of yearly summary of records of transactions clearly showing
which transactions corresponds to members and non-members
 5. Certification under oath of the List of Members with corresponding TIN and share
capital contribution
 4. Revenue Memorandum Circular 12-2010
Effective June 16, 2010

 4. Revenue Memorandum Circular 12-2010

Effective June 16, 2010
Joint Rules and Regulations Implementing
Art. 60 , 61 and 144 of RA 9520
Definition of Terms
UNDIVIDED NET SURPLUS /UNDIVIDED NET SAVINGS- refers to
the net amount arising from the operations of the cooperative after
deducting the operational expenses from revenue generated.
ACCUMULATED RESERVES – ACCUMULATED AMOUNT OF
MONEY DEDUCTED FROM THE NET SURPLUS, WHICH SHALL NOT BE LESS
THAN 50% FOR THE FIRST FIVE YEARS OF OPERATION AFTER REGISTRATION
AND NOT LESS THAN 10% THEREAFTER, INTENDED NOT FOR THE
ALLOCATION OR DISTRIBUTION TO THE MEMBERS BUT FOR THE
PROTECTION AND STABILITY OF THE COOPERATIVE REFERED TO AS
RESERVE FUND.
UNDIVIDED NET SURPLUS/SAVINGS
 Gross Sales = 5,000,000.00
 Less : Cost of Sales = 1,000,000.00
 Less :Allowable Expense = 300,000.00
 Undivided Net Surplus/Savings 3,700,000.00
ACCUMULATED RESERVE
 Accumulated reserve after five years in operation
cooperative must have a reserve of not less than 10% of
the Net Surplus

 Example 12% x P3,700,000 = 444,000.00

Undivided Net Savings +Accumulated Reserves
 A. Transacting with members only
 UNS + AR = is less than Ten Million = Exempt
 UNS + AR = is more than 10Million = Exempt
 B. Transacting with both Members and Non-Members
 UNS + AR = is More than Ten Million = cooperative subject to tax
on transaction with non-members
Cooperatives dealing with MEMBERS ONLY is
EXEMPT FROM (IVEPADFV)
 Income TAX
 VAT
 Excise Tax
 Percentage Tax
 Annual registration Fee P500
 Documentary Stamp tax
 Final tax 20% interest income deposit and 7.5% EFC
 VAT on revenues on system loss and revenues on
distribution, supply and transmission of electricity to
members
Section 8. COOPERATIVE TRANSACTING OR DEALING WITH BOTH MEMBERS
AND NON-MEMBERS With LESS THAN TEN MILLION PESOS AR and UNS

 EXEMPT FROM
 INCOME TAX
 VAT
 EXCISE TAX
 PERCENTAGE TAX
 ANNUAL FEE OF 500
 DONORS TAX
 FINAL TAX 20% INCOME ON DEPOSIT
 VAT ON REVENUES ON SYTEM LOSS
Sec. 8 B. Cooperatives Transaction with BOTH MEMBERS AND
NON –MEMBERS WITH More Than 10 Million AR and UNS
SUBJECT TO :
 A. INCOME TAX- TAX BASE SHALL BE THE NET
SURPLUS ARISING FROM THE BUSINESS
TRANSACTIONS WITH NON-MEMBERS AFTER
DEDUCTING STATUTORY RESERVE FUND
Coop. transacting with both members and non-
members with more than 10 Million AR and UNS
 Subject to the following taxes on transaction with non-
members:
 Income Tax
 Documentary Stamp Tax
 VAT
 Percentage Tax
 Excise
 Business Activities not listed in
the Articles of Cooperation

 COOPERATIVES ENGAGED IN BUS. ACTIVITIES

NOT RELATED TO ITS PRIMARY/SECONDARY
PURPOSE SHALL BE SUBJECT TO :
 INCOME TAX
 VAT
 PERCENTAGE TAX
 DOCUMENTARY STAMP TAX
 EXCISE TAX
 OTHER INTERNAL REVENUE TAXES
TAXABILITY OF COOPERATIVES with approved
Certificate of Tax Exemption
a. Capital Gains Tax - sale of shares of stocks, or sale exchange
or other disposition of real property classified as capital asset.
b. Documentary Stamp Taxes on transactions of cooperatives
dealing with non-members ;
c. VAT billed on purchases of goods and services except
the VAT on the importation by agricultural cooperatives of direct farm
inputs, machineries and equipment;
d. Withholding tax on compensation/ wages except
minimum wage earners- cooperatives are considered withholding agent on
all income payments that are subject to withholding tax under RR 2-98;
e. All other taxes for which the cooperative are not
otherwise expressly exempted by any law.
f. (Sec. 10 of RMC 12-2010)
Coop as WITHHOLDING AGENT
 COOP are considered as withholding agents and are
required to file withholding tax returns and remit
withholding taxes on all income payment that are
subject to withholding.
 If cooperative fails to withhold and remit such tax or
account, the coop shall be liable upon conviction
to a penalty equal to the total amount of the tax
not withheld or not accounted for and remitted.
 Section 251 of the NIRC
VAT
 Services billed by PLDT and other
telecommunication services to COOPs
-Subject to 12% VAT
 BIR Ruling 353-11 dated Sept 28, 2011
Taxability of Coop Members under RA 9520
 ALL COOP MEMBERS ARE LIABLE TO PAY ALL THE
NECESSARY INTERNAL REVENUE TAXES EXCEPT :
 MEMBER’S DEPOSITS OR FIXED DEPOSIT WITH
COOPERATIVE (OTHERWISE KNOWN AS THE
SHARE CAPITAL)
 DOCUMENTARY STAMP TAX ON TRANSACTIONS
OF MEMBERS WITH THE COOPERATIVE
 PATRONAGE REFUND
 (Section 11 of RMC 12-2010)
MEMBERS DEPOSIT/ FIXED
DEPOSIT/SHARE CAPITAL
 Interest on Deposits
 NOT SUBJECT TO WITHHOLDING TAX
 SUBJECT TO INCOME TAX TO BE DECLARED
IN THE ITR OF THE MEMBER
 RMC 47-2011 Savings and time Deposit of the
members of cooperative are not subject ro 20%
final tax on interest income.
NET SURPLUS DISTRIBUTED TO MEMBERS
 INTEREST ON MEMBER’S SHARE CAPITAL
 (Dividends)
 NOT SUBJECT WITHHOLDING TAX
 TO BE DECLARED IN THE ITR OF THE MEMBER
(subject to income tax)
 NOT SUBJECT TO VAT

 (BIR RULING 075-05 DATED MARCH 9, 2005)

PATRONAGE REFUND
 NOT SUBJECT TO WITHHOLDING TAX AND
INCOME TAX
 NOT SUBJECT TO VAT
 NO NEED TO DECLARE IN THE ITR

 (BIR RULING DA 075-05 DATED MARCH 9, 2005)

DOCUMENTARY STAMP TAX (DST)
 Exempt from DST on Loans to members of
Cooperative
 Exempt from DST on members on MEMBERS
CONTRIBUTION BEING ENTIRELY DIFFERENT
FROM CORPORATE SHARE OF STOCKS HENCE,
NOT SUBJECT TO DST under Sec. 174 of the Tax Code.
 (BIR RULING DA 075-05 DATED MARCH 9, 2005
Documentary Stamp Tax
 RMO 25-2011 - all requests of issuance of certification
and cert. true copy by a taxpayer xxxxxxxx shall pay
P100.00 Certification fee and P15.00 DST for each
certificate.
 Section 188 Tax Code- on each certificate or document
or any description required by law issued or by rules
or regulations of a public office, there shall be
collected a documentary stamp tax.
Director’s fee
 IF THE DIRECTOR IS AN EMPLOYEE OF THE
COOPERATIVE : CONSIDERED AS COMPENSATION
INCOME

 IF THE DIRECTOR IS NOT AN EMPLOYEE OF THE

COOP: TREATED AS PROFESSIONAL INCOME
SUBJECT TO CREDITABLE WITHHOLDING TAX
RMC 34-2008 ON DIRECTOR’S FEE
 SUBJECT TO CREDITABLE WITHHOLDING TAX OF
10% FOR GROSS RECEIPTS not EXCEEDING
(p720,000.00) and 15% if exceeding 720,000.00
 WITHHOLDING TAX APPLIES TO PER DEIMS,
ALLOWANCES, AND ANY OTHER FORM OF
INCOME PAYMENT TO DIRECTOR
In closing …….
 Cooperatives, including their members, deserve a
preferential tax treatment because of the vital role they
play in the attainment of economic development and social
justice. Thus, although taxes are the lifeblood of the
government, the State’s power to tax must give way to
foster the creation and growth of cooperatives. To
borrow the words of Justice Isagani A. Cruz: "The power of
taxation, while indispensable, is not absolute and may
be subordinated to the demands of social justice."34


~end~