BIR Ruling No. 367-2021

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Section 39(a)(1) PD 269 BIR Ruling No. l70-14

TC} i} 14t3 - 367

SAMAR HI ELECTRIC COOPERATIVE, INC. Brgy. Arado Paranas, Samar

Attention: Joey L. Talon, CPA General Manager

Gentlemen:

on the exemption of Samar II Etectric Cooperative, Inc. pursuant to Presidential Decree (PD) No. 269 This refers to your letter dated January 30, 2017 requesting for a confirmatory ruling

on August 23, 1975. It is represented that Samar II Electric Cooperative, Inc. (Samar II for brevity) (TIN: 00) was registered with the National Electrictrification Administration (NEA)

no water. Section 39 of PD No. 269 states that: In reply, please be informed that support from PD No. 269 for tax exemption, holds

Duties, Fees; Assistance from the National Power Corporation. Pursuant to the national policy declared in Section 2, the Congress hereby finds and declares that the following ussistance to cooperative is necessary and appropriate: "Section 39. Assistance to Cooperatives: Exemption from Taxes, Imposts.

duties or imposts on foreign goods acquired for its operations, the period of such exemption for a new cooperative formed by this Decree: Provided, That the Board of Administrators shall. ufier (a) Provided that it operates in conformity with the purposes und provisions of this Decree, cooperative (1) shall be permanently exempt from paying income taxes, and (2) for a period ending on December 31: of the thirtieth full calendar year afier the date of a cooperative's organization or conversion hereunder. or until it shall become completely free of indebtedness incurred by borrowing, whichever event first occurs, shall be exempt from the payment (a) of all National Government, local government and municipal taxes and fees, including franchise, filing, recordation, license or permit fees or tuxes and any fees, charges, or costs involved in any court or consolidation, as provided for in Section 29, to begin from as of the date of the beginning of such period for the constituent consolidating cooperative which was most recently organized or converted under udministrative proceeding in which it may be a purty, and (b) of all

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provided for in this Decree. consultation with the Bureau of Internal Revenue, promulgate rules and regulations for the proper implementation of the tax exemptions

and duty privileges of electric cooperatives under PD No. 269, viz: July 1, 1987, through Fiscal Incentives Resolution Board (FIRB) No. 24-87 restored the tax issuance of PD No. 1955 by then President Ferdinand E. Marcos on October 10, 1984 which withdrew the tax exemptions of PD No. 269. Subsequently, then President Ferdinand E. exemption of all electric cooperatives. However, in December of 1986, then President Corazon C. Aquino issued Executive Order (EO) No. 93 which withdrew all tax exemptions granted to private entities starting March 10. 1987. The implementation was nevertheless suspended by virtue of Memorandum Order No. 65 until June 30, 1987 for cooperatives. On Marcos issued PD No. 2008 requiring the Ministry of Finance to immediately restore the tax This provision of PD No. 269 has been successively modified commencing on the

bank deposits and yield or any other similar arrangements shall remain taxable: Provided, further, That the electric cooperatives shall furnish the FIRB on an annuat basis or as often as the FIRB their operations and other information as may be required, for purposes of effective and efficient tax and duty exemption "BE IT RESOLVED, as it hereby resolved, That the tax and duty terms and conditions of Presidential Decree No. 269 (creating the its powers and activities, appropriating the necessary funds therefore and declaring a national policy objective for the total to attain the said objective, prescribing terms and conditions for their operations, the repeai of Republic Act No. 6038, and for other purposes), as amended, are restored effective July 1, 1987: Provided, however, That income from their electric service operations and other sources including the interest income from may require them to do so, statistical and financial statements of avaiiment. exemption privileges of electric cooperatives granted under the National Electrification Administration as a corporation, prescribing electrification of the Philippines on an area coverage basis; the organization, promotion and development of electric cooperatives

(SGD) JAIME V.ONGPIN Secretary of Finance Chairman, FIRB

24, 1987 which restored NPC's tax exemption privileges effective starting March 10, 1987. the date of effectivity of EO No. 93 (S'86). The Supreme Court held: exemption privileges. The same was granted under FIRB Resolution No. 17-87 dated June Executive Secretary, Office of the President, Hon. Vicente Jayme, etc., et al.', where the tax exemption privileges of NPC after being withdrawn under EO No. 93 (S'86) issued by President Aquino. Its Section 2 allowed the NPC to appiy for the restoration of its tax Supreme Court, sitting en banc, clarified issues relative to the restoration of the FIRB of the In the case of Ernesto M. Maceda vs. Hon. Catalino Macaruig, Jr., in his capacity as

: (j.R. No. 88291. May 31. 1991

.: ACt 021

exemption privileges for the first time. It was just asking that its tax exemption privileges be restored. It is for these reasons that, at tax exemption privileges under FIRB Resolution Nos. 10-85 and 1. least in NPC's case, the recommendation and approval of NPC's 86, done by the same person acting in his dual capacities as While as above-mentioned, FIRB Resolution No. 17-87 was 93 (S'86), had no authority to sub-delegate to the FIRB, which was her thereunder. Chairman of the Fiscal Incentives Review Board and Minister of been expressed that President Aquino, at least with regard to E.O. allegedly not a delegate of the legislature, the power delegated to "It should be noted that NPC' was not asking to be granted tax Finance, respectively, do not violate procedural due process. approved by President Aquino on October 5, 1987, the view has

A misconception must be cleared up.

exercising both Executive and Legislative powers. Thus, there was E.0. No. 93 (S'86), is a delegate of the legislature. Clearly, she was not sub-delegating her power. When E.0. No. 93 (S'86) was issued. President Aquino was no power delegated to her, rather it was she who was delegating her power. She delegated it to the FIRB, which, for purposes of

Pelaez vs. Auditor General. ' And E.O. No. 93 (S'86), as a delegating law, was complete in itself to which the delegate had to conform in the performance of his functions, both qualities having been enunciated by this Court in - it set forth the policy to be carried out and it fixed the standard

exemption under FIRB Resolution No. 24-87 was not retroactive to the date of effectivity of Cooperative, Inc. vs. The Province of Davao Oriental2, recognized the validity of FIRB Resolution No. 24-87 in settling the issue of whether or not the restoration of the tax PD No. 1955: Along these lines. the Supreme Court, in the case of Davao Oriental Electric

24-87. We affirm the ruling of the CA. Indeed, even a cursory crystal clear in stating that "the tax and duty exemption privileges law is plain and unambiguous. When the language of the law is clear and unequivocal, the law must be taken to mean exactly what it says. reading of the resolution, quoted above, bares no indicia of retroactivity of its application. FIRB Resolution No. 24-87 is of electric cooperatives granted under the terms and conditions of Presidential Decree No. 269 . . . are restored effective July 1, "First, we resolve the issue of retroactivity of FIRB Resolution No. 1987." There is no other way to construe it. The language of the

2 (.R. No. 17090t. January 20. 2009

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no question that an electric cooperative established under PD No. 269 is entitled to the tax however, expressly provides that "income from their electric service operations and other cxemption privileges subject to the conditions stated in the FIRB Resolution. benefit from bank deposits and yield or any other similar arrangements shall remain taxable" thus, restoring the duty and tax exemptions cnjoyed by Electric Cooperatives established pursuant to PD No. 269 (Sec. 39) which were previously withdrawn, and that the said been declared as a valid delegation of legislative power pursuant to the Maceda case, there is sources inciuding the interest income from bank deposits and yield or any other monetary Resolution No. 24-87 was issued in compliance with the mandate of EO No. 93 which has Inasmuch as the FIRB Resolution No. 24-87 issued on June 14, l987, which.

it shall become completely free of indebtedness incurred by borrowing, whichever event comes first.3 operations is subject to income tax. Beginning January 1, 2006, however, Samar II is subject to all other national government taxes and fees, including VAT, filing, recordation, license or permit fees or taxes as its exemption ended on December 31, 2005, the thirtieth full calendar year after the date of the cooperative's organization as stated in its registration papers or untit Accordingly, this Office opines that Samar II's income from its electric service

following: Moreover, all Electric Cooperatives registered with the NEA, shall be subject to the

1. 20% final income tax on interest from any currency bank deposit and yieid or any arrangements and royalties derived from sources within the Philippines; other monetary benefit from deposit substitutes and from trust funds and similar

2. 15% final income tax on interest income derived from a depositary bank under the expanded foreign currency deposit system;

3. Capital Gains Tax on sales or exchanges of real property classified as capital sold or disposed of through the stock exchange: assets and on sale, exchange and other disposition of shares of stock except shares

4. 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 iiable for the tax:

5. VAT billed on purchases of goods and services;

6. All other taxes for which the ECs are not otherwise expressly exempted by any Iaw.

as amended by RR No. 4-2007, particularly Section 4.108-2 (13) and Section 4.108-3 (f) provide that sales of etectricity by generation, transmission, and/or distribution companies are fuel generated through renewable sources of energy such as, but not limited to. biomass. electric cooperatives was removed. Consequently, Revenue Regulations (RR) No. 16-2005. now subject to 12% VAT on their gross receipts. Provided, however, that sale of power or Upon the effectivity of Republic Act (RA) No. 9337, the exemption from VAT of

3 B1R Ruling No. 398-20 13. November 4 2013

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solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT.

pursuant to RA 9337, as implemented by RR No. 16-2005, as amended. Therefore, electric cooperatives are now subject to VAT on their gross receipts

(RMC) No. 72-2003 or RR No. 20-2001 shall preclude the examination of the books of accounts or other accounting records of Samar H by duly authorized internal revenue officers for internal revenue tax purposes only. It should be noted that nothing in the aforesaid Revenue Memorandum Circular

However, if upon investigation, it will be disclosed that the facts are different, then this ruiing shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours,

Commissioner of Internal Revenue CAESAR R. DULAY

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