RR No. 20-2001: Implements the provisions of Articles 61 and 62 of RA No. 6938, as amended, relative to the availment of tax exemptions granted to cooperatives

Summary

RR No. 20-2001 implements Articles 61 and 62 of Republic Act No. 6938, as amended, the Cooperative Code of the Philippines, on tax exemptions of cooperatives.

Key points

1. Cooperatives dealing with members only. Duly registered cooperatives are exempt from taxes they are directly liable for. These are Income Tax on operations, VAT under Section 109 pars. (r), (s), (t) and (u), the 3% Percentage Tax under Section 116, and Excise Tax under Title VI. Also exempt are Donor’s Tax on donations to accredited charitable, research and educational institutions and reinvestment to socio-economic projects in their area, DST under Title VII, and the P 500.00 annual registration fee under Section 236(B). For DST, the non-exempt other party is directly liable.
2. Mixed dealings, reserves up to P 10 Million. Duly registered cooperatives dealing with both members and non-members with accumulated reserves and undivided net savings of not more than P 10 Million are exempt from all the national internal revenue taxes listed above.
3. Mixed dealings, reserves over P 10 Million. These cooperatives are exempt from Income Tax for ten (10) years from CDA registration, subject to specific conditions, plus VAT, the 3% Percentage Tax and the P 500.00 annual registration fee. They also get limited or full deductibility of amounts donated and reinvested in socio-economic projects.
4. Members are not exempt. Members must pay all taxes under the Tax Code, including tax on earnings from their capital contribution. Interest received by members of cooperatives with reserves over P 10 Million is no longer taxable in their hands after the ten-year exemption lapses.
5. Unrelated income and withholding. Income unrelated to the main business is subject to all appropriate taxes under the Tax Code of 1997, for all types of cooperatives. All cooperatives are withholding agents who file Withholding Tax Returns and remit withholding taxes on income payments subject to withholding.

Who is affected

• Duly registered cooperatives
• Members of cooperatives

Deadlines and effectivity

• Income Tax exemption of ten (10) years from CDA registration (cooperatives with reserves over P 10 Million)

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.