Published — January 12, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Aside from taxability of cooperatives, read also: WHAT IS A COOPERATIVE?
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Cooperatives which do not transact any business with non-members are not taxable
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Cooperatives transacting business with members are not taxable
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Cooperatives may claim tax refund
Membership has its privileges.
“Taxes are the dues that we pay for the privileges of membership in an organized society.” – Franklin D. Roosevelt.
In our previous article, we have tackled about the common privileges that may be enjoyed by cooperatives. Are there any other privileges that may be enjoyed by cooperatives?
The law says:
Yes.
In addition to those common privileges that we have stated in our previous article is that registered cooperatives which do not transact any business with non-members or the general public are not subject to any taxes and fees imposed under the internal revenue laws and other tax laws.
In cases where cooperatives transacted business with both members and non-members, its transactions with the former are not subject to any taxes and fees, including but not limited to final taxes on members’ deposits and documentary tax.
Also, cooperatives with accumulated reserves and undivided net savings of not more than Ten Million Pesos (Php 10,000,000.00) are exempt from all national, city, provincial, municipal or barangay taxes of whatever nature.
Are cooperatives exempted from the payment of Value-added tax (VAT)?
For a better understanding, let us take the case of Commissioner of Internal Revenue vs. Negros Consolidated Farmers Multi-Purpose Cooperative, G.R. No. 212735, December 05, 2018.
In this case, Negros Consolidated Farmers Multi-Purpose Cooperative (COFA) was constrained to pay an advance Value-added tax (VAT) under protest on the basis of the condition set by the Bureau of Internal Revenue (BIR) that the payment of “advance VAT” is necessary for the issuance of Authorization Allowing the Release of Refined Sugar (AARRS).
Subsequently, COFA filed for an administrative claim for refund for the advance VAT it paid. It argued that the payment in advance of VAT for the withdrawal of sugar from the refinery/mill was without basis.
May COFA claim a refund of the advance VAT it has paid?
The Supreme Court says:
Yes.
COFA is a VAT-exempt agricultural cooperative. Exemption from the payment of VAT on sales made by the agricultural cooperatives to members or to non-members necessarily includes exemption from the payment of “advance VAT” upon the withdrawal of the refined sugar from the sugar mill.
By express provision of law, the sale itself by agricultural cooperatives duly registered with the Cooperative Development Authority (CDA) to their members as well as the sale of their produce, whether in its original state or processed from, to non-members are exempt from VAT.
Thus, COFA is exempted from the payment of VAT and as a consequence, is entitled to claim a refund.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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