coop lecture 7

8/10/2019 Coop Lecture 7

http://slidepdf.com/reader/full/coop-lecture-7 1/30

T X BILITY

OF

COOPER TIVES



Definition per PD NO. 175

Cooperative shall mean only

organizations composed primarily

of small producers andconsumers who voluntarily joined

together to form business

enterprises which they themselvesown, control and patronize.



Small producer is a self-employed

individual who, by himself or withhis family, provides the primary

labor requirements of his

business enterprise or one whoearns at least 50% of his gross

income from the payment

proceeds or income of the laborhe provides.



Cert i f icate of Tax Exemption -

means the ruling granting

exemption to the cooperativeissued by the BIR

(This means that cooperatives

are not automatically exempt

from certain taxes)



Income Tax - means corporate/

cooperative Income Tax underthe National Revenue Code

Sales Tax - refers to either the VAT

or percentage tax (also referredto as business taxes)



Net Surp lus /Net Savings - refers to

the net amount arising from the

operations of the cooperative,belonging to its members, not

construed as profit, but as excess

of payments made by themembers for the loans borrowed



or the goods and services bought

from the cooperative which shallbe made available to them in the

form of interest not to exceed the

normal rate of return oninvestments and patronage refund.



Und ivided Net Savings - refers tothe amount arising from net

surplus or any portion thereofwhich the Board of Directors ofthe General Assembly of thecooperative decides not todivide or make available tomembers in the form of :



interest on share capital

patronage refund

reserve refund,

education and training fund

optional fund or any other statutory reserve



this also includes the amount

arising from the net surplus or

any portion thereof which thecooperative is unable to divide

because the General Assembly of

the cooperative has not beenconvened for more than (2) years.



Definition per PD NO. 175

Share Capital – is the money paid orrequired to be paid by the membersfor the conduct of the operations ofthe cooperative

Limited Interests to Capital - sharecapital shall earn only limitedinterests, the maximum rate of

which is to be established by theDep’t of Local Gov’t and CommunityDev’t (now DILG) from time to time.



Patronage Refund refers to Net Incomeafter the interest on capital has been

paid shall be redistributed among themembers in proportion to theirpatronage.

Reserve Refund The fund set aside forfunding of reserves (statutory andother reserves) established by thecooperative such as Retirement,

Mutual Benefit and other funds. Thismay be in the form of time deposits orother securities which are readilyconvertible into cash when needed.



Accumulated Reserves - refers to

the amount of accrued sum of

money annually retained and

deducted from the net surplus

which is not intended forallocation or distribution to the



members, usually deposited in

the bank for the protection of andstability of the cooperative

commonly referred to as the

General Reserve Fund.



EXEMPTION FROM TAXES

Duly registered cooperativesdealing/transacting business with

members only shall be exempt

from paying the following taxes forwhich they are directly liable, viz:



a. Income Tax on income from

operations;

b. VAT under Sec. 109 pars. (r), (s),(t) and (u) of the 1997 Tax Code ;

-sale by agricultural cooperatives

-sales by electric cooperatives

-gross receipts by credit or



- sales by multi-purpose coops

- sales by non-agricultural,

non-electric and non-credit

cooperatives subject to

certain conditions.c. 3% Percentage Tax under Sec.116 of the Tax Code of 1997;



d. Donor’s tax on donations to duly

accredited charitable, research

and educational institutions, andreinvestment to socio-economic

projects within the area of

operation of the cooperatives;e. Excise tax under the Tax Code;



f. Documentary Stamp Taxes

provided however, that the other

party to the taxable document ortransaction who is not exempt

shall be the one directly liable

for the tax; andg. Annual RF of P500.00



The tax base for all cooperatives

liable to IT shall be net surplus

arising from business transactionswith non-members after deducting

the amounts for the statutory

reserve funds as provided for inthe Coop Code and other laws.



Notwithstanding the foregoing,

all income of the cooperative notrelated to its main/principal

business(es) shall be subject to

all the appropriate taxes underthe Tax Code.



This is applicable to all types of

cooperatives, whether dealing

purely with members or bothmembers and non-members.

In any event, all types of

cooperatives are required toregister with the BIR.



LIABILITY OF COOPS TO OTHER

INTERNAL REVENUE TAXES

Regardless of classification theyshall be subject to:

a) 20% Final Income Tax (FT) on

- interest from any currency

bank deposit and yield or



any other monetary benefit from

deposit substitutes and fromtrust funds and similar

arrangements and royalties

derived from sources within thePhilippines;



b) 7.5% FT on interest derived

from a depository bank under

the expanded foreign currencydeposit system (EFCDS);

c) CGT on sales or exchanges of

real property classified as capitalassets or shares of stock;



d) DST on transactions of

cooperatives dealing with non- members when the accumulated

reserves and undivided net

savings of such cooperativesexceed P10M;



e) VAT billed on purchases of goods and services,

except the VAT on the (1) importation of

agricultural cooperatives of direct farm inputs,

machineries and equipment, including spare

parts thereof, to be used directly and exclusively in

the production and/or processing of their

produce, and (2) importation by electric

cooperatives of machineries and equipment,

including spare parts, which shall be directly usedin the generation and distribution of electricity,

pursuant to Section 109 (r) and (s) of the Tax Code

of 1997 but which are not available locally as

certified by the DTI.



VALIDITY OF TAX

EXEMPTION CERTIFICATE

The Tax Exemption Certificateshall be valid during such period

that the Cooperative is in good

standing as ascertained by theCDA on an annual basis.



ANNUAL RETURN AND

DOCUMENTS TO BE FILED

WITH THE BIR

A copy of the Certificate of Good

Standing issued by the CDA to thecooperative shall, together with



the Annual Information Return (for

non-taxable cooperative) or IT

Return (for taxable cooperative)

and F/S, be submitted on or before

the 5th day of the 4th month ffg.

the close of the taxable year.

coop lecture 7

Documents