Coops (and members) exempt from Documentary Stamps
It is final. The Bureau of Internal Revenue (BIR) has clarified to all its personnel that co-ops need not pay for Documentary Stamps. Thanks to a “Request for Ruling” that COOP-NATCCO Partylist Rep. Sabiniano Canama filed, the BIR issued Memorandum Circular 124-2020 dated November 25, 2020.
On the prevailing rule on the exemption from documentary stamp tax on transactions between cooperatives and its members, the memo said: “Transactions between cooperatives and its members are not subject to documentary stamp tax. Both the cooperative and its members are not liable to pay DST on these transations.”
The memo cited Articles 60 and 61 of the Cooperative Code of 2008.
However, only transactions with members are exempt.
The memo also stated: “Section 11 of the Joint IRR states that all members of cooperative shall be liable to pay all the necessary internal revenue taxes under the National Internal Revenue Coe, as amended, except any tax and fee but not limited to final tax on member’s deposit (otherwise known as share capital with cooperatives and documentary tax on transactions of members with the cooperative.”
This is a reversal of the statements of BIR officials at technical working group meetings with the co-op sector, wherein they stated “Only co-ops are exempted from documentary stamp tax and that such exemption does not apply to their individual members.” Thus, members had been required to pay DST.
But that is now clarified – and reversed.
At the TWG discussions on July 21, some co-ops complained to the Bureau of Internal Revenue (BIR) that they were being made to pay for DST for transacting with members.
BIR’s Atty. Jovilyn Marquez clarified that: “Co-ops are exempt from documentary stamp tax. All coops transacting with members are definitely exempt as per the Cooperative Code of 2008 (RA 9520) and its Joint Rules & Regulations of 2010.
Under the TRAIN Law, official documents require documentary stamps. These include Issuance and Transfer of Shares, Certificates of Profits, Bills of Exchange, Life Insurance Policies, Annuities and Pre-Need Plans, Leases and Hiring Agreements, Powers of Attorney, all Debt Instruments, and now, even Deeds of Donation of Real Property.
So why are co-op transactions still being required Documentary Stamps?
The BIR officials replied that RA 9520 Article 61 exempts co-ops from DST, but NOT the entity (in this case the member) that the co-op is transacting with. The DST is to be shouldered by the entity that the co-op is transacting with.
BIR said the tax exemption granted to co-ops does not extend to members.
Marquez cited RMO 76-2010 Section 7 f: “Duly registered cooperatives dealing/transacting business with members only shall be exempt from paying any taxes and fees, including but not limited to . . .
Documentary Stamp Tax imposed under Title VII of the National Internal Revenue Code as amended, provided however, that the other party to the taxable document/transaction who is not exempt SHALL BE THE ONE DIRECTLY LIABLE FOR THE TAX.”
BIR also cited Joint Rules & Regulations on Art 60 & 61 of RA 9520 in relation to RA 8424 (NIRC) Section 10 on Taxability of Coops to Other Taxes – “All cooperatives, regardless of classification shall be subject to Documentary Stamp Taxes on transactions of cooperatives dealing with non-members, except transactions with banks and insurance companies, provided that whenever one party to the taxable document enjoys the exemption from DST, the other party who is not exempt shall be the one directly liable for the tax.”
However, the co-op leaders insisted that RA 9520 Article 61 says: “Co-ops transacting business with both members and non-members shall not be subject to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall NOT be subject to any taxes and fees, including but not limited to final taxes on members’ deposits and documentary tax.”