LEGAL

OPINION
FOR THE WEEK

DILG Legal Opinion No. 86 s. 2011

 ISSUE:
Tax Exemption of a Mission
Cooperative in connection
with the renewal of business
permit
2
 Legal Basis of Tax Exemption of
Cooperatives
Article 61 of RA 9520
"(1) Cooperatives
ART.61. Tax with and accumulated reserves and
Other Exemptions. undivided net
Cooperatives
savings of not more
transacting than Tenwith
business million
bothpesos (P10,000,000.00)
members and non- shall
be exempt
members from shall
all national,
not becity,subjected
provincial, tomunicipal
tax onor barangay
their
taxestransactions
of whatever with namemembers.
and nature. In Such cooperatives
relation to this, shall
the be
exempt from customs
transactions duties, with
of members advance sales or compensating
the cooperative shall not
taxesbeonsubject
their importation
to any taxesofandmachineries, equipment
fees, including andtospare
not limited
partsfinal
usedtaxes
by them and whichdeposits
on members’ are not and
available locally a tax.
documentary certified
by the department of
Notwithstanding thetrade and of
provisions industry
any law (DTI). All tax free
or regulation
importations
to the shall not be sold
contrary, suchnorcooperatives
the beneficial dealing
ownershipwith thereof
be transferred
nonmembers to any
shallperson untilfollowing
enjoy the after fivetax(5)exemptions:
years, otherwise,
the cooperative and the transferee or assignee shall be solidarily
liable to pay twice the amount of the imposed tax and / or duties. 3
 Legal Basis of Tax Exemption of
Cooperatives
Section 133 (n) of LGC
Section 133. Common Limitations on the Taxing Powers
of Local Government Units. - Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
(n) Taxes, fees or charges, on Countryside and Barangay
Business Enterprises and cooperatives duly registered
under RA. No. 6810 and R.A. No. 6938 otherwise known
as the “Cooperative Code of the Philippines” respectively;
xxx 4
 Legal Basis of Tax Exemption of
Cooperatives
Section 234 (d) of LGC
Section 234. Exemptions from Real Property
Tax. - The following are exempted from
payment of the real property tax:
xxx
(d) All real property owned by duly registered
cooperatives as provided for under RA No.
6938; x x x
5
 1. Obtain or secure a
Mayor’s permitcharges
3. Pay service and payor
the commensurate
However,
rentals the use ofcost
for cooperatives of
property
2. Secure
regulation, a Community
inspection
and equipment and
or public
transacting business
Tax
utilitiesCertificate,
owned by theas
local
withsurveillance
both members of the
and
juridical
government
operation entity and
such
of itsare as pay the
charges
business
non-members still
basic tax
for actual
but of Five
water
not exceeding Hundred
consumption,
required to do theOne
electric(Php500.00);
Pesos power, toll fees for
and
Thousand
following: Pesos
the use of public roads and
(Php1,000.00)
bridges, and the like.
 Assuming that Mission Cooperatives are
qualified of the tax exemption under Article 61
of RA 9520, then the assessed Mayor’s Business
Permit fee and local taxes, fees and charges
amounting to P153,425.20 is an erroneous
assessment considering that cooperatives
registered with the CDA are exempt from local
taxes, fees and charges under conditions laid out
under Article 61 of RA 9520, with the exception
of the above-quoted fees/charges which
cooperatives transacting business with both
members and non-members are required to pay.7
 Does the rule on
exemption defeat the
fiscal autonomy
enjoyed by LGUs?

8
 The contention is erroneous. The basis for the
exemption from local taxes, fees and charges of
qualified cooperatives is RA 9520, which is a
special law on cooperatives. While it may be
said that LGUs enjoy fiscal autonomy, this is
not absolute since the grant of fiscal autonomy
to LGUs is subject to the limitations imposed
by law, in this case RA 6938, as amended by
RA 9520.
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 Each local government unit
shall have the power to create
its own sources of revenue and
to levy taxes, fees, and charges
subject to such guidelines and
limitations as the Congress
may provide, consistent with
the basic policy of local
autonomy. Such taxes, fees and
charges shall accrue exclusively
to the local government.

Section 5, Article X of the 1987 Constitution