Law Summary
Objectives of the Revenue Memorandum Order (RMO)
- Simplify procedures for availing tax exemptions and incentives under Articles 60, 61, and 144 of RA 9520.
- Ensure efficient and effective administration of tax exemptions.
- Enhance coordination between Revenue Regions and National Office for monitoring the revenue impact.
Policy
- Streamlined, integrated process to confirm cooperative tax exemptions.
- Authority delegated to Revenue District Offices (RDOs) and Revenue Regions instead of BIR National Office for processing applications.
General Guidelines for Registration and Tax Exemption
- Cooperatives previously registered under RA 6938 and RA 6939 are automatically registered under RA 9520 and must secure a new CDA registration certificate.
- Cooperatives must update their BIR registration following the new CDA certificate.
- BIR Registration update can be done simultaneously with the application for tax exemption.
- RDOs to issue updated registration and tax exemption certificates within 10 working days upon complete submission.
- Incomplete or unsupported applications will be refused by RDO.
Documentary Requirements for Tax Exemption
Original Issuance:
- Duly filled BIR Form No. 1945.
- Certified True Copies of Articles of Cooperation and By-Laws.
- Certified True Copy of CDA-issued new Certificate of Registration.
- Current Certificate of Good Standing from CDA.
- Certified True Copy of BIR Certificate of Registration.
- Certification under oath of cooperative members’ list with TIN and capital contributions.
Renewal:
- Duly filled BIR Form No. 1945.
- Certified True Copies of latest Articles of Cooperation and By-Laws.
- Current Certificate of Good Standing from CDA.
- Latest audited financial statements by BIR-accredited CPA.
Processing Procedure
- Cooperatives must update BIR profile and submit application for tax exemption at the RDO.
- RDO conducts pre-evaluation using prescribed checklist.
- If compliant, RDO endorses the application to the Regional Director within five working days.
- Chief, Legal Division reviews and prepares Certificate of Tax Exemption.
- Regional Director approves and signs the certificate.
- Certificates are numbered sequentially and issued back to the RDO for release to the cooperative.
Tax Exemptions under RA No. 9520
- Cooperatives transacting business only with members are exempt from:
- Income Tax
- Value-Added Tax (VAT)
- Percentage Tax
- Donor’s Tax on donations for socio-economic projects
- Excise Tax
- Documentary Stamp Tax (DST), except liability of the other party
- Annual Registration Fee (P500)
- Taxes on transactions with banks and insurance companies
- Electric cooperatives exempt from VAT on certain revenues
Taxability of Cooperatives Transacting with Members and Non-Members
- Cooperatives with reserves and undivided net savings ≤ Php 10 million enjoy full exemption.
- Cooperatives with more than Php 10 million reserves:
- Transactions with members: fully exempt as per Section 7.
- Transactions with non-members: subject to income tax, VAT, percentage tax, and other internal revenue taxes minus specific exemptions.
- Specific VAT exemptions for:
- Agricultural cooperatives on sales and importation related to production.
- Lending activities by credit/multi-purpose cooperatives.
- Non-agricultural cooperatives with member share capital ≤ P15,000.
- Donations and reinvestments receive limited or full deductibility.
- Tax exemptions on certain transactions with banks and insurance companies apply.
Taxability of Unrelated Income
- Income not related to cooperative’s principal business is taxable under NIRC regardless of cooperative type.
Other Taxes Applicable to Cooperatives
- Capital Gains Tax on sale of capital assets.
- Documentary Stamp Tax on transactions involving non-members, with liability on non-exempt parties.
- VAT on purchases except authorized imports by agricultural cooperatives.
- Withholding taxes on compensation (except minimum wage earners) and other applicable withholding taxes.
- Other taxes cooperatives are liable for unless expressly exempted by law.
Validity and Monitoring Requirements of Certificate of Tax Exemption
- Valid for five years from issuance unless revoked or cancelled.
- Annual submission with BIR Form 1702 of the following to RDO:
- Current Certificate of Good Standing from CDA.
- Certification under oath from Chairperson/General Manager including cooperative’s business activities, member/non-member transactions, accumulated reserves, net surplus, and patronage refunds.
- Yearly summary of transactions distinguishing member and non-member dealings.
- Certification under oath of members’ TIN and capital contributions.
- Failure to submit required documents may lead to cancellation/revocation.
Renewal of Certificate of Tax Exemption
- Cooperatives must file BIR Form No. 1945 at least two months before expiration.
- Renewal valid for an additional five years unless revoked earlier.
Monitoring of Revenue Impact
- RDOs must submit cooperative profile reports annually after BIR Form 1702 filing.
- Reports include cooperative lists, business operations, income, reserves, and other financial details.
- Regional Directors consolidate and forward reports to Assessment Service for management’s review.
- Monthly summary reports on issuance of tax exemption certificates submitted by Regional Directors to Legal Service.
Transitory and Repealing Provisions
- Pending applications with the BIR Law Division transferred to RDOs for processing within ten days.
- Applicants required to update BIR registration.
- All inconsistent issuances repealed or amended.
Effectivity
- The Order takes effect immediately upon issuance.