RMC No. 121-2021: Clarifies the taxability of the interest paid by Cooperatives to its member’s deposit or fixed deposits otherwise known as share capital

Key points

1. Basis. Section 11 of RMC No. 12-10 circularizes the Joint Rules implementing Articles 60, 61 and 144 of RA No. 9520 (Philippine Cooperative Code of 2008). It makes cooperative members liable for internal revenue taxes under the NIRC, except for any tax and fee, including the final tax on members’ deposits or fixed deposits with cooperatives and the documentary tax on members’ transactions with the cooperative.
2. Definitions. Member’s deposit means savings and time deposits of regular and associate members. Share capital means the member’s paid up capital.
3. Result. Members are not liable for tax or fee on the interest earned on members’ deposits and fixed deposits (share capital). Cooperatives are therefore not liable to withhold tax on that interest.

Who is affected

• Members of cooperatives
• Cooperatives paying interest on members’ deposits