Rules on Tax Exemption for Cooperatives

Regulations must align with RA 9520’s policy, concepts, and principles (Articles 2, 3, 4).
In event of conflict or ambiguity, interpretation favors cooperatives and members per Article 142 of RA 9520.

Establishes specific definitions for terms such as Accumulated Reserves, BIR, Business Transaction, Capital Assets, Certificate of Good Standing, Cooperative, CDA, Interest on Share Capital, Patronage Refund, Registration, Transactions with Members/Non-members, Undivided Net Surplus, Unrelated Transactions, etc.

Types include Credit, Consumer, Producer, Marketing, Service, Multipurpose, Advocacy, Agrarian Reform, Cooperative Bank, Dairy, Education, Electric, Financial Service, Fishermen, Health Services, Housing, Insurance, Transport, Water Service, Worker’s Cooperatives, and others defined by CDA.

Categorized by membership:
- Primary (natural persons)
- Secondary (primary cooperatives as members)
- Tertiary (secondary cooperatives as members)
Categorized by territory according to operational areas.

Cooperatives transacting only with members.
Cooperatives transacting with both members and non-members; subdivided based on accumulated reserves and net savings less than or equal to, or exceeding, Php10 million.

Exempt from multiple taxes under the NIRC including Income Tax, VAT, Percentage Tax, Donor’s Tax (in certain cases), Excise Tax, Documentary Stamp Tax (DST), Annual Registration Fee, taxes on transactions with banks and insurance companies.
Electric cooperatives exempt from VAT on system losses and certain revenues.

Cooperatives with reserves up to Php10 million get full tax exemption as members-only cooperatives.
Those exceeding Php10 million:
- Business with members: fully exempted.
- Business with non-members: subject to income tax, VAT (with exceptions), percentage tax, and other internal revenue taxes.
- Specific VAT exemptions for agricultural cooperatives’ sales and certain loans.
- Subject to limited/full deductibility of donations and certain tax exemptions on bank and insurance transactions.

All income from activities unrelated to cooperative’s principal business must pay applicable taxes regardless of cooperative type.

All cooperatives subject to capital gains tax, DST on non-member transactions, VAT on purchases (with exceptions), withholding taxes, and other taxes where not expressly exempted.

Members liable to pay required taxes, except:
- Final tax on deposits (share capital) with cooperatives.
- DST for transactions with the cooperative.
- Patronage refunds are exempt.

Requires cooperatives to secure certificate from BIR based on new CDA registration.
Application processed within 45 days; failure may hold BIR personnel liable.
Certificate valid for 5 years, subject to annual good standing.
Cooperatives exempt from annual registration fees if reserves don’t exceed Php10 million.

Application must be sent to Revenue District Office with copies of CDA registration, Articles of Cooperation and By-laws, Certificate of Good Standing, BIR registration, and other relevant documents.
Initial tax exemption is effective retroactively from RA 9520’s effectivity if registration complied with.
Late applicants subject to prior internal revenue taxes but may apply for refund/credit.

Valid for 5 years; renewal to be filed at least 2 months before expiry.
Renewal requires updated documents like good standing certificate, transaction certifications, financial statements, and others.
Soft copies allowed when voluminous, subject to verification.

BIR audits require prior authorization from CDA within 20 days of request.
Formal investigation only starts with official Letter of Authority and CDA authorization.

Cooperatives registered under previous law with unpaid assessments may settle at 20% of assessed tax.
Financial incapacity may allow further relief and installment payments.

Cooperatives registered under RA 6938 deemed registered under RA 9520 if required documents submitted within one year.
Failure results in cancellation of registration.
Pending tax exemption applications under prior law to be acted upon within 45 days of new regulations’ effectivity.

Repeals Revenue Regulations 13-2008, 6-2007, parts of 16-2005, and inconsistent issuances.

Declares remaining provisions valid if any part of the regulations is declared unconstitutional or invalid.