1. COOPERATIVES

2. TOPICS I.Definition of Terms II.Taxation on Cooperatives 1.Transacting with Members Only 2.Accumulated Reserves & Undivided Net Savings of P10M or less dealing with Members/Non Members 3.Cooperatives with AcR & UNS over P10M, deal with M/NM 4.Taxes Impose on Cooperatives III.Registration/TIN Requirements IV.Bookkeeping Requirements V.Invoicing Requirements VI.Reporting Requirements VII.Application for Tax Exemption VIII.BIR Audit IX.Compliance with Withholding Tax X.Statutory References

3. Cooperative - means a co-operative duly registered with CDA - one confirmed by CDA as primary, secondary or tertiary coops. Cooperative Development Authority - the government agency in charge of the registration/regulation of coops Registration - operative act granting juridical personality to a proposed coop as evidenced by a Certificate of Registration Certificate of Tax Exemption (CTE) - ruling issued by BIR granting exemption to coop Definition of Terms

4. Income Tax (IT) - means corporate income tax Sales Tax (ST) – percentage tax (PT) or value-added tax (VAT)‏ Net Surplus/Net Savings (NS) – RE of the coop available for distribution to members as patronage refund or interest on investment not exceeding the normal rate. Undivided Net surplus (UNS) – retained earnings not available for distribution as ruled out by the Board of Directors or is unable to divide because the General Assembly has not been convened for more than two(2) years Accumulated Reserves (AcR) – amount from net surplus reserved to ensure stability of the coop. Also called “General Reserve Fund” I. Definition of Terms

5. II. Taxation (per RR 20-2001 dated 11.12.01 amending RMC 48-91 dated 6.18.9 as amended by RR 16-2005)‏ A. CDM or CDM/NM w/ AcR&UNS is P10M or less EXEMPT Income Tax on income from operations Value Added Tax under Sec 109l – Agricultural coops; Sec 109m – credit coops; Sec 109n – non agricultural, non electric, non credit coops but no member whose capital contribution shall exceed P15,000. Percentage Taxes under Section 116 of the Tax Code Section 116: Tax on persons Exempt from VAT – any Person whose sales or receipts are exempt under Section 109(1)(v) of this Code from the payment of VAT and who is not a VAT registered person shall pay a tax equivalent to Three percent (3%) of his gross monthly sales or receipts. Provided, that co-operatives shall be exempt from the three percent (3%) gross receipts tax herein imposed. Section 109(v): Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and or gross receipts do not exceed P1,500,000 shall be exempt from the payment of VAT.

6. II. Taxation (per RR 20-2001 dated 11.12.01 amending RMC 48-91 dated 6.18.9 as me)nded by RR 16-2005) A. CDM or CDM/NM w/ AcR/UNS is P10M or less EXEMPT –Donors Tax – on its donation to charitable, research, and educational institutions and re-investment in socio-economic projects w/in the area of operations of the coop. –Excise Taxes (Title VI-NIRC)‏ –Documentary Stamp Taxes – provided that when the other party to the transaction or document is not exempt shall be the one liable for the tax (Title VII-NIRC)‏

7. II. Taxation (per RR 20-2001 dated 11.12.01 amending RMC 48-91 dated 6.18.9 As amended by RR 16-2005)‏ B. CDM/NM, AcR & UNS exceeds P10M - EXEMPTION Income Tax for 10 years from date of CDA registration provided that: 1.25% of NI is returned to member as patronage refund 2.Co-operatives whose exemption were revoked by EO 93, 10 yrs. starts from 3.10.87 until 3.10.97 3.After the lapse of 10 year period, subject to IT at full rate 4.Tax base – net surplus from transactions with non-members less amount for statutory reserve funds as provided in the Coop Code 5.Full deductibility from GI – donations made to charitable, research and education institutions and re-investment in socio- economic projects within the area of operations of the coop. –VAT – (Sec 109n) Sales by non-agri, non-electric and non- credit coops duly registered w/ and in good standing CDA Provided, share capital contributions of each member does not exceed P15,000.

8. II. Taxation (per RR 20-2001 dated 11.12.01 amending RMC 48-91 dated 6.18.9 as amended by RR 16-2005)‏ CDM/NM, AcR/UNS exceeds p10M –Percentage Taxes – producers, marketing and service coops only. Other coops are taxable on their income from non- members regardless of their AcR & UNS –Annual Registration fee of P500.00 –All other taxes like DST, Excise taxes etc.

9. II. Taxation (per RR 20-2001 dated 11.12.01 amending RMC 48-91 dated 6.18.9) as amended by RR 16-05 C. Other Internal Revenue Taxes Imposed on Cooperatives 20& FWT on royalties and interest from bank deposits and similar arrangements; 7.5% FWT interest from EFCDS; CGT on sale or exchanges of real properties or stock; DST on transactions with non-members (AR-UNS over P10M)‏ VAT billed on purchases of goods or services not exempt. Except : importation of direct farm inputs, machinery and equipment & spare part to be used directly and exclusively in production and/or processing of their produce.

10. II. Taxation (per RR 20-2001 dated 11.12.01 amending RMC 48-91 dated 6.18.9)‏ C. Other Internal Revenue Taxes Imposed on Co- operatives a.% Taxes under sections under Sections 117 – common carriers tax, 3%; 118 – international carriers tax, 3%; 119 – franchise tax, 2%; 120 – overseas communication tax, 10%; 121 – bank tax, 5%, 3%, 1%, 0%; 122 – tax on finance comp., 5%, 3%, 1%, 0%; 123 – Insurance Premium Tax, %; 124 – tax agents of FIC, %; 125 – amusement taxes, 10%, 15%, 18%, 30%; 126 – tax on winnings, 4%, & 10%; and 127 – tax on sale of stocks through the LSEs or IPOs on their income from non- members regardles of AcR/UNS (Sec. 62.3 RA 6938 Coop code)‏ Note: Income from unrelated business subject to the appropriate taxes. All coops are considered WITH HOLDING AGENTS.

11. TAXABILITY OF MEMBERS/STOCKHOLDER OF COOPS The exemption of the coops does not extend to its members hence, members are liable to pay all the necessary internal revenue including taxes on earnings derived from their contributions. After the lapse of the ten(10) years, exemption of Cooperative with AcR & UNS over P10 million, the interest received by members are no longer taxable.

12. Valid during such period that the coop is in good standing as certified by CDA on annual basis. VALIDITY OF CERTIFICATE OF TAX EXEMPTION

13. III. A. An Application of Tax Identification Numbers (TIN)‏ 1.Duly followed up application for TIN (BIR form #3)‏ 2.CDA Registration Certificate 3.For TIN plastic card use BIR form 1925**** 4.2x2 logo Processing Period TIN : Same Day

14. III. B. Registration of Business Name (RMC 48-91 / RMO 54-98)‏ 1.Registration certificate from CDA 2.Mayors permit / Certification 3.Sketch-location of Business 4.Articles of cooperation and by-laws 5.BIR form 1903 (application for registration)‏ Issuance of Cert. of Registration – after attending tax briefing for new registrants WHERE: Home RDO of the co-operative. WHEN : Within 10 working days from issuance of Mayors Permit

15. IV. Bookkeeping Requirements A.Books to register (Sec. 232 NIRC)‏ 1.a. Annual Sales is P50,000 or less – Simplified books of Accounts duly authorized by the Secretary of Finance b. annual Sales is more than P50,000 – Journal and ledger. c. Gross Quarterly Sales more than P150,000 – books of accounts audited and examine yearly by Independent CPA. B.RR V-45-requires the registration of B/A before using them. C.Preservation of Books of Account and accounting records – 3 years (Sec 235 in relation to Sec. 203)‏ When to Register: Initial – upon registration of business name Subsequent – before end of accounting period or before the kind of book is full. A.Accounting Period: Calendar year or Fiscal Year B.Transactions shall be recorded in the books within 24 hours

16. V. INVOICING A.Start of Issuance – commencement business operations of taxpayer. A.Sec. 237 of the Tax Code requires the issuance of receipt for every purchase worth P25 or more. That if the amount is P100 or more, the name of the buyer shall be written on the receipt. Provided further, that if the seller is a VAT member, regardless of the amount, a receipt shall be issued.

17. V. INVOICING A.Documentary Requirements in the Printing of Invoices Properly filled up BIR Form 1906 (Application for Authority to Print or ATP)‏ Xerox Copy of BIR Registration Certificate Sample of Invoice to be Printed Copy of the last receipt of previous sets of authorized receipt Job Order (issued by Printer)‏ Photocopy of the filed 1903 of the taxpayer B.Others (in case): Secure permit to use cash register machine Secure permit to use loose-leaf or computerized accounting Stamping by BIR is required on printed receipts****

18. VI. REPORTING REQUIREMENTS 1.Inventory of Merchandise – within 30 days from end of accounting period 2.Annual Return: a.BIR Form 1702AIF-3 or Account Information Form for Tax Exempt Organization with the following attachments: i.Financial Statements (Income Statement and Balance Sheet) Provided when the sales is P150,000.00 or more in any one quarter of the accounting period, the same shall be certified by an independent CPA ii.Certificate of Good Standing from CDA b.BIR Form 1702 – for taxable coops. + ( i ) & ( ii ) above c.WHEN: w/in 105 days from end of accounting period d.WHERE : Collection Agent or AAB w/in the home RDO of taxpayer

19. VII. TAX EXEMPTION CERTIFICATE When: Ten (10 ) days from issuance of Cert. of Registration by CDA Where: Home RDO-BIR of the coop. Att’n: Chief, Legal Division

20. VII. TAX EXEMPTION CERTIFICATE Documentary Requirements: a.A Letter of Application signed by the President/GM b.Articles of Co-operation and By-laws c.Cert. True Copy (CTC) of Cert. of Registration with CDA d.CTC of Confirmation of Registration (for coops registered before creation of CDA e.Certificate signed by the President/GM that the co-operative deals with members only or with non-members also, whichever is applicable f.Original copy of Certificate of Good Standing from CDA g.Certification of the Chairman/Pres./GM of the coop that at least 25% of the net income is returned to members as patronage refund h.Certificate under Oath of the list of members with corresponding capital contributions i.Latest financial statements duly audited by an independent CPA

21. VIII. BIR EXEMPTIONS Sec. 235 of the Tax Code empowers the Bureau of Internal Revenue to examine the books and pertinent records and operations of the co-operative to ascertain its compliance with the conditions under which it granted exemptions. The revenue officer shall be equipped with the corresponding Letter of Authority (LA), Mission Order (MO) oar Tax Verification Notice (TVN) before he can audit a taxpayer. Frequency of Audit: normally once annually except in the ff. case Fraud, irregularity, or mistakes as determined by the Commissioner The taxpayer requested for re-investigation Verification of compliance with WT laws and regulations. Verification of capital gains tax liabilities In the exercise of the Commissioner’s power under Section 5(B) of the Tax Code to obtain information from other person.

22. IX. Compliance with Withholding Tax Law Any person who pays or controls the payment income subject to withholding tax becomes a withholding agent and must withhold the said tax and remit the same to the BIR within the required period of time. Duties of the Withholding Agent: Register Deduct and Withhold Remit File Return Issue certificates to payee from whom taxes were withheld or income payments not subjected to withholding as provided by law.

23. IX. Compliance with Withholding Tax Law Kinds of Withholding 1.Wages (Compensation of employees)‏ 2.Final taxes on fringe benefits of the coops officers Final withholding taxes on prizes exceeding P10,000 etc. 1.Expanded withholding taxes on rental etc. 2.WT on Government Money Payments (Gov’t. Co-ops)‏

24. X. STATUTORY REFERENCES 1.RA 8424 – National Internal Revenue code of 1997 2.RA 1645 – NEA Act 3.PD 269 – NEA Decree 4.RA 6938 – Co-operative Code of the Philippines 5.RA 6939 – Co-operative Development Authority Code 6.RRs 2-98, 6-2000 & 10-2000 – Implementing regulations on WT 7.RR 54-98 – checklist of Registration Guidelines 8.RMC 48-91 – Prescribing Registration requirements 9.RR 20-2001 Guidelines on Sec. 61 & 62 of Coop Code 10.EO 93, PD 775, EO 898 11.RA 9337 12.RR 16-05

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