QuestionsQuestions (CDA)
The Joint Rules implement the tax exemption for cooperatives under Articles 60 and 61 of RA 9520, and provide guidelines for availment and related purposes, pursuant to Sections 4 and 244 of the NIRC (RA 8424) and Article 144 of RA 9520.
They must be resolved and construed liberally in favor of cooperatives and their members, consistent with Article 142 of RA 9520.
It is the CDA-issued annual certificate to cooperatives that comply with CDA requirements (CDA-Memorandum Circular No. 2008-03 and amendments). For internal revenue tax purposes, it is an essential requirement before issuance of the BIR Certificate of Tax Exemption/Ruling.
Membership: Primary (members are natural persons), Secondary (members are primaries), Tertiary (members are secondary cooperatives). Territory: categorized by areas of operation which may or may not coincide with political subdivisions.
1) Cooperatives transacting business with members only; and 2) cooperatives transacting business with both members and non-members, further sub-classified into those with accumulated reserves and undivided net savings not more than Php10,000,000, and those with more than Php10,000,000.
They are exempt from income tax, VAT, percentage tax, donor’s tax on donations to accredited charitable research/educational institutions and reinvestment to socio-economic projects within the area of operation, excise tax where directly liable, documentary stamp tax (with rule on who is liable), annual registration fee of Php500, certain taxes on transactions with insurance companies and banks (including specified final taxes), and for electric cooperatives: exemption from VAT on systems loss and VAT on certain electricity-related revenues and subsidies.
They are exempt from all national internal revenue taxes for which they are liable as enumerated in Section 7 of the Joint Rules (i.e., similar exemptions as members-only cooperatives as listed).
Business transactions with members are exempt from all national internal revenue taxes enumerated in Section 7. Business transactions with non-members are taxable, including income tax (on amount allocated for interest on capitals), VAT (subject to specific exemptions in NIRC provisions cited), and percentage tax on sales of goods/services to non-members at the applicable rate, among other taxes unless otherwise provided.
The tax base is the net surplus arising from business transactions with non-members after deducting amounts for the statutory reserve funds as provided for in the Cooperative Code and other laws.
Yes, generally VAT applies on transactions with non-members at the full rate. However, the Joint Rules reiterate that cooperatives may be exempt from VAT under Section 109(L), (M), and (N) of the NIRC as amended by RA 9337, including specified exemptions for agricultural cooperatives, gross receipts from lending activities by credit/multi-purpose cooperatives, and other non-agricultural/non-electric/non-credit cooperative conditions.
Income of cooperatives not related to their main/principal business under their Articles of Cooperation is subject to the appropriate taxes under the NIRC, regardless of whether the cooperative transacts only with members or with both members and non-members.
They remain subject to capital gains tax on sale of shares/real property as capital assets; documentary stamp taxes on certain transactions (especially with non-members with rules on liability); VAT on purchases of goods and services (with an exception on certain agricultural cooperative importations); withholding tax on compensation/wages and applicable creditable/final withholding taxes; and other taxes for which they are directly liable and not expressly exempt.
Members are liable to pay necessary internal revenue taxes under the NIRC except: (1) final tax on member deposits/fixed deposits (share capital) with cooperatives and documentary tax on member transactions with the cooperative; and (2) patronage refund (refunds/returns/rebates of net savings from cooperative operations).
They must file a signed letter-application to the RDO, stating type of cooperative and transactions with members/non-members, and attach: CDA Certificate of Registration (copy), Articles and By-Laws (copy), current CDA Certificate of Good Standing (copy; without it no processing), and a copy of the BIR Certificate of Registration. The application is processed by the BIR Regional Director/ACIR Legal Service according to delegated authority.
Cooperatives must apply within sixty (60) days from issuance of their CDA Certificate of Registration under RA 9520. For initial issuance under RA 9520, effectivity commences from the year RA 9520 took effect, provided the cooperative registered with the CDA as required under Article 144.
Valid for five (5) years from date of issue/effectivity, and during such period that the cooperative remains in good standing as ascertained by the CDA on an annual basis.
Renewal must be filed at least two (2) months prior to expiration. It must be for five (5) years unless sooner revoked for cause, and must include documents such as updated CDA Certificate of Registration, Articles and By-Laws, current Certificate of Good Standing (effective on application date), an oath regarding transactions (members-only or members & non-members), transaction records if with non-members, certifications on reserves and return to members, list of members and share capital, and latest audited financial statements.