Exempt Domestic Corporation (RCIT)

1. Exempt non-profit corp. under NIRC

2. Government agencies and instrumentalities
3. Exempt government-owned and controlled operations
4. Cooperatives

Tax Exemption
- Relates only to income from RELATED ACTIVITIES.
- Income from unrelated activities for which an exempt corporation is organized are taxable (subject to RCIT)

Exempt Corporations
1. Labor, agricultural, or horticultural organizations not organized principally for profit.

2. Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock
organized and operated for mutual purposes and without profit.

3. A beneficiary society, order, or association, operating for the exclusive benefit of the members such as a fraternal
organization operating under the lodge system, or mutual aid association or a nonstock corporation organized by
employees providing for the payment of life, sickness, accident, or other benefits exclusively to the members of
such society, order, or association, or nonstock corporation or their dependents.

4. Cemetery company owned and operated exclusively for the benefit of its members.

5. Nonstock corporation or association organized and operated exclusively for religious, charitable, scientific,
athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to
or inure to the benefit of any member, organizer, officer or any specific person.

6. Business league chamber of commerce, or board of trade, not organized for profit and no part of the net income of
which insures to the benefit of any private stockholder, or individual;

7. Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare.

8. A nonstock and nonprofit educational institution.

9. Government educational institution.

10. Farmers' or other mutual typhoon or fire insurance company, mutual ditch, or irrigation company, mutual or
cooperative telephone company, or like organization of a purely local character, the income of which consists
solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and

11. Farmers', fruit growers', or like association organized and operated as a sales agent for the purpose of marketing
the products of its members and turning back to them the proceeds of sales, less the necessary selling expenses
based on the quantity of produce finished by them.

Government agencies and instrumentalities

- Inherently non-profit because of their public service functions, hence they are exempt from income tax

- Income from unrelated activities – subject to income tax

Government Owned and Controlled Corporations (GOCC)

- Generally proprietary or commercial in nature, subject to RCIT
 Exempt GOCC
1. GSIS
2. SSS
3. Philippine health and Insurance Corporation
4. Home Development Mutual Fund (HDMF) - RA 11534
5. Local Water Districts – RA No. 10026

COOPERATIVES - an autonomous association of persons who voluntarily joined together to achieve their social,
economic, and cultural needs and aspirations by making equitable contributions to the capital required… and accepting
a fair share of risk and benefits of the undertaking.
Accumulated reserve – A.K.A reserve fund which refers to the totality of the amounts legally required to be deducted
annually from the annual net surplus (income) of the cooperative for its protection and stability.
1. Reserve Fund - At least 10% of the net surplus BUT must not be less than
50% of the net surplus in the first 5 years
2. Education and Training Fund - Not more than 10% of net surplus
3. Community development fund - Not less than 3% of net surplus
4. Optional land and Building fund - Not to exceed 7% of net surplus
5. Interest - Not to exceed normal rate of return on inv.
6. Patronage Refunds - Not less than 30% of the net surplus after deducting
statutory reserves.
7. Any excess to reserve fund
Classification of registered cooperatives
Cooperatives with transact business with ONLY Cooperatives with transact business with BOTH
MEMBERS MEMBERS AND NON-MEMBERS
Not subject to any taxes and fees under NIRC and other NOT more than 10M accumulated reserve and undivided
tax laws: net savings – EXEMPT
1. Income tax (on related regular income) - MORE than 10M are subject to the ff:
2. VAT and Percentage tax 1. Income tax on the full amount allocated for interest on
3. Donor’s tax capital
4. Excise Tax 2. VAT on transactions with non-members
5. Documentary stamp tax 3. Percentage Tax on all sales of goods or services related
6. Annual registration fees to non-members
4. All other internal revenues taxes unless otherwise
provided by the law.

TAXABILITY OF COOPERATIVES TO INTERNAL REVENUE TAX

All cooperatives regardless of classification are subject to the ff: (Determined after provision for the general reserve
1. Applicable income tax on unrelated activities fund)
2. CGT
3. Documentary stamp tax
4. VAT on purchases of goods/services EXCEPT VAT exempt importations
5. Withholding tax on wages EXCEPT minimum wage earners
6. All other tax for which cooperatives are directly liable and not otherwise expressly exempted by law