CDA Tax Exemption: Who Qualifies, Coverage, and Renewal

A cooperative registered with the Cooperative Development Authority (CDA) can qualify for wide-ranging tax exemptions under Republic Act No. 9520, the Philippine Cooperative Code of 2008. How much of the CDA tax exemption you actually get depends on two things: whether your cooperative transacts only with members or also with non-members, and, if it deals with non-members, whether its accumulated reserves and undivided net savings exceed ten million pesos. To use the exemption, the cooperative must hold a Certificate of Tax Exemption from the Bureau of Internal Revenue, valid for five years.¹

Who Qualifies

Eligibility begins with active registration under RA 9520. A cooperative registered under the older Cooperative Code must first secure a new Certificate of Registration under RA 9520 before it can apply for a Certificate of Tax Exemption with the BIR.¹

The cooperative also needs a current Certificate of Good Standing (also called Certificate of Good Compliance) from the CDA. The BIR will not process a tax exemption application without it, and an expired certificate has the same effect as none at all.² Keeping it means staying current on CDA reporting, including audited financial statements and annual reports.

Member-Only Cooperatives Pay Nothing

Cooperatives that transact only with their members get the widest coverage. Under Article 60 of RA 9520, they are not subject to any taxes and fees imposed under the internal revenue laws or other tax laws. There is no reserve threshold and no income cap. If every transaction stays within the membership, the cooperative owes the BIR nothing.¹

Cooperatives That Deal With Non-Members

Article 61 covers cooperatives doing business with both members and non-members. Transactions with members stay fully exempt from all taxes and fees, including final taxes on members’ deposits and documentary stamp tax. The tax question only arises on the non-member side.¹

Reserves of ₱10 Million or Less

Where the combined accumulated reserves and undivided net savings do not exceed ten million pesos, the cooperative is exempt from all national, city, provincial, municipal, and barangay taxes on its non-member transactions. That reach covers income tax, value-added tax, percentage tax, and every other tax at every level of government.¹

These cooperatives are also spared customs duties and advance sales or compensating taxes on imported machinery, equipment, and spare parts, provided the Department of Trade and Industry certifies the items are not locally available. One condition applies: the tax-free imports cannot be sold or transferred to anyone else for five years. Break that rule and both the cooperative and the buyer become jointly liable for double the original tax and duties owed.¹

Reserves Above ₱10 Million

Once reserves and undivided net savings cross the ten-million-peso line, non-member transactions become taxable. Under Article 61(2), the cooperative owes the following at full rate on its non-member business:¹

Income tax on the amount allocated for interest on share capital, provided the same tax is not also imposed on the interest individually received by members.
VAT on non-member transactions. Cooperatives organized by their members to produce, process, and sell raw materials or finished products stay VAT-exempt on those sales to both members and non-members, as long as at least 25% of the cooperative’s net income is returned to members as interest on share capital or patronage refunds.
All other applicable taxes, including percentage tax and other internal revenue taxes unless specifically exempted elsewhere.

Even at this tier, member transactions stay fully exempt, and the cooperative keeps deductibility for donations to accredited charitable, research, and educational institutions and for reinvestments into socio-economic projects within its area of operation.³

Which Taxes the Exemption Covers

The Joint Rules and Regulations implementing RA 9520 identify the specific taxes covered. For member-only cooperatives, and for the member-transaction side of cooperatives that also deal with non-members, the exempt taxes are:³

Income tax under Title II of the National Internal Revenue Code
Value-added tax (12%) under Title IV
Percentage tax under Title V
Donor’s tax on donations to accredited charitable, research, and educational institutions and reinvestments into local socio-economic projects
Excise tax under Title VI, where the cooperative is directly liable
Documentary stamp tax under Title VII (the non-exempt party to a taxable document remains liable for its share)
The BIR annual registration fee of ₱500
Taxes on transactions with banks and insurance companies, including the 20% final tax on interest from deposits and the 7.5% final income tax on interest from the expanded foreign currency deposit system
VAT on systems loss and distribution charges for electric cooperatives registered with the CDA

How to Apply

The cooperative files BIR Form 1945, “Application for Certificate of Tax Exemption for Cooperatives,” at the Revenue District Office (RDO) where it is registered. The form asks for the cooperative’s TIN, the taxes from which it seeks exemption, and details on membership and financial structure.²

An application without complete supporting documents will not be accepted. Once everything is in order, the revenue officer must transmit the application and supporting documents to the Regional Director, through the Chief of the Legal Division, within five working days of filing.⁴ Update your BIR registration (Form 1905) before applying, since the BIR treats this as a condition for processing.²

Documents for a First-Time Application

A cooperative applying for the first time submits:²

Certified true copies of the Articles of Cooperation and By-Laws, certified by the CDA
Certified true copy of the Certificate of Registration issued by the CDA under RA 9520
Certified true copy of the current Certificate of Good Standing or Certificate of Good Compliance, effective on the date of application
Photocopy of the BIR Certificate of Registration (BIR Form 2303)
Original sworn certification listing all members, their capital contributions, and their TINs (if a member has no TIN, the cooperative gives the member’s full name and capital contribution instead)

One detail that catches cooperatives out: the BIR allows six months from the date the Certificate of Tax Exemption is issued to submit any missing member TINs. Failing to provide them within that window is grounds for the BIR to revoke the certificate.²

Documents for Renewal

Renewals require a slightly different set:⁴

Certified true copy of the CDA Certificate of Registration under RA 9520
Certified true copies of the latest Articles of Cooperation and By-Laws
Certified true copy of the current Certificate of Good Standing
Certified true copy of the latest audited financial statements for the immediately preceding year, audited by a BIR-accredited independent CPA

The audited financial statements are the key addition on renewal. The BIR uses them to verify accumulated reserves and undivided net savings, which decide whether the cooperative sits in the fully exempt bracket or the taxable tier for non-member business.

Validity and Renewal Deadline

A Certificate of Tax Exemption is valid for five years from the date of issue. The renewal application must be filed at least two months before the existing certificate expires.⁴ Missing that window can leave the cooperative without a valid certificate on hand during BIR audits and routine compliance checks.

How Cooperatives Lose the Exemption

The BIR can cancel or revoke a Certificate of Tax Exemption when the cooperative fails to comply with documentary and reporting requirements. Grounds for revocation include failing to submit member TINs within six months, letting the Certificate of Good Standing lapse, and not filing the required annual reports with the CDA.²

The BIR also scrutinizes cooperatives whose activities drift away from cooperative purposes. Extending the tax exemption to profit-oriented activities that resemble a regular corporation, outsourcing core operations to subcontractors, or conducting the bulk of business with non-members rather than serving the membership can support a finding that the cooperative has deviated from the principles of cooperativism. In those cases, the BIR treats the non-qualifying activities as taxable, regardless of the certificate.⁵

When a cooperative is assessed back taxes for operating outside its exempt status, the BIR imposes surcharges, penalties, and interest on top of the tax owed. Requests to waive these penalties are routinely denied. As one BIR ruling put it, condoning delays in tax payments for light reasons would undermine the entire penalty system.⁵

1
Cooperative Development Authority. Republic Act 9520 – Philippine Cooperative Code of 2008
2
Bureau of Internal Revenue. BIR Form 1945 – Application for Certificate of Tax Exemption for Cooperatives
3
Supreme Court E-Library. Joint Rules and Regulations Implementing Articles 60, 61 and 144 of Republic Act No. 9520
4
Cooperative Development Authority. Revenue Memorandum Order No. 76-2010 – BIR Stand on Cooperative CTE
5
Cooperative Development Authority. Handling Audit and Investigation of Cooperatives