THIRTEENTH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINES 
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First Regular Session 
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S E N A T E  
S. No. 2% 
Introduced by Senator S. R. OsmeAa 111 
EXPLANATORY NOTE 
Cooperatives have proven their worth as practical vehicles for 
people empowerment and sustained balanced development especially in the 
countryside. 
For allowing the lower income groups to increase their ownership 
in the wealth of the nation, it is only appropriate for government to grant 
cooperatives with numerous privileges to serve as special encouragement. 
While the clear intent of the law in fostering the growth of cooperatives is 
to help the less fortunate and lower income segments of Philippine society, in an 
increasing number of cases, affluent individuals and parties have organized 
themselves as cooperatives and have taken advantage of tax and other 
exemptions on their huge volumes of business to enrich themselves further and 
profit from the patronage of the poorer people. They are able to do this because 
there is nothing in the present law which limits the enjoyment of exemptions and 
privileges to the lower income people. 
In order to limit the enjoyment of tax and other exemptions to cooperatives 
of small producers, small service providers, and/or consumers, this bill defines a 
small producer or small provider as “an individual who by himself or with his 
family provides the primary labor requirement of his business enterprise, or one 
who earns at least fifty percent (50%) of his income from the payment, proceeds 
or income of the labor he personally provides”. A small consumer is defined as 
“an individual who buys or procures goods or services to satisfy his personal 
and/or family needs, or the needs of his personal or family enterprise as a small 
producer or small service provider”. 
Limiting the availment of fiscal and other 
privileges to the poorer segments of society, will make it justifiable to grant them 
clearer and fuller tax exemptions. 
Under the substitute wording for Article 62 of the Cooperative Code, the 
bill provides for .the weeding out of pseudo-cooperatives by directing the 
Cooperative Development Authority, after due hearing, to withdraw the tax 
exemptions, other privileges and registration of cooperatives whose members 
are not small producers and/or consumers as defined in the proposed Act. The 
measure also directs the CDA to promulgate the rules and regulations to 
implement this provision, including, if necessary - the re-registration of all 
cooperatives. 


Moreover, to remedy the difficulty in comprehending and complying with 
the tax exemptions and related benefits granted to cooperatives couched in very 
lengthy and complicated provisions with so many qualifications and distinctions, 
this bill seeks to simplify the matter by substituting a new provision for Article 61 
of the Cooperative Code of the Philippines. 
In order to plug the loopholes existing in the present law, grant meaningful 
assistance and encouragement to cooperatives of the lower-income groups, and 
strengthen a regime of social justice and development in Philippine society, the 
passage of this bill is earnestly sought. 
S E ~ G I O  
OSMENA 111 
Senator 


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THIRTEENTH CONGRESS OF THE REPUBLIC 
} 
OF THE PHILIPPINES 
1 
First Regular Session 
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S E N A T E  
S. No. 
Introduced by Senator S. R. OsmeAa 111 
AN ACT 
STRENGTHENING COOPERATIVES, AMENDING FOR THE PURPOSE 
OTHERWISE 
KNOWN 
AS 
THE 
"COOPERATIVE 
CODE 
OF 
THE 
P H I LI PPI N ES " 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
REPUBLIC ACT NUMBERED SIXTY-NINE HUNDRED AND THIRTY-EIGHT, 
SECTION I. 
Article 5 of Republic Act No. 6938 is hereby amended by 
inserting new subsections, designated as subsections (IO) and (I 
I), after 
subsection (9) to read as follows: 
"ART. 5. Definition of Terms. - x x x 
(I) 
x x x  
X 
x 
(8) Cooperative Development Authority - means the government agency 
in charge of the registration and regulation of cooperative as such, hereinafter 
referred to at the Authority; [and] 
(9) 
Universally Accepted Principles - means that body of cooperative 
principles ad hered to worldwide by cooperatives in other jurisdictions[,]; 
( I O )  SMALL PRODUCER OR SMALL SERVICE PROVlDER - SHALL 
MEAN AN INDIVIDUAL, WHO BY HIMSELF OR WITH HIS FAMILY PROVIDES 
THE PRINCIPAL LABOR REQUIREMENT OF HIS BUSINESS ENTERPRISE. 
OR ONE WHO EARNS AT LEAST FIFTY PERCENTUM (5Oo/n\ OF HIS TOTAI 
. . . - . - , . . - 
\ - - . - I  
- .  


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INCOME FROM THE PAYMENT, PROCEEDS OR INCOME OF THE LABOR 
HE PERSONALLY PROVIDES; AND 
(11) SMALL CONSUMER - SHALL MEAN AN INDIVIDUAL WHO BUYS 
OR PROCURES GOODS OR SERVICES TO SATISFY HIS PERSONAL 
AND/OR FAMILY NEEDS, OR THE NEEDS OF HIS PERSONAL OR FAMILY 
ENTERPRISE AS A SMALL PRODUCER OR SMALL SERVICE PROVIDER.” 
SEC. 2. Article 14(2) of the same Code is hereby amended by inserting a 
new subsection, designated as subsection (b), after subsection (a) to read as 
follows: 
“ART. 14. Articles of Cooperation. - (1) xxx 
(2) The articles of cooperation shall set forth: 
(A) x x x  
(B) WHENEVER APPLICABLE, A BRIEF DESCRIPTION OF THE 
MEMBERS OF THE COOPERATIVE AS SMALL PRODUCERS, SMALL 
SERVICE 
PROVIDERS, AND/OR 
SMALL CONSUMERS AS 
HEREIN 
DE F 1 N ED ; ” 
[(b)] (C) The purpose or purposes and scope of business for which the 
cooperative is to be registered; 
[(c)] (D) The term of existence of the cooperative; 
[(d)] (E) The area of operation and the postal address of its principal 
office; 
[(e)] (F) 
The names, nationality, and the postal addresses of the 
registrants; 
[(f)] (G) The common bond of membership; 
[(g)] (H) 
The list of names of the directors who shall manage the 
cooperative; and 
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[(h)] (I) The amount of its share capital, the names and residences of its 
contributors and a statement of whether the cooperative is primary, secondary or 
tertiary in accordance with Article 23 hereof. 
x x  x 
SEC. 3. The entire provision of Article 61 of the same Code is hereby 
deleted and a new provision is inserted, to read as follows: 
“[ART. 
61. 
Tax Treatment of Cooperatives. - Duly registered 
cooperatives under this Code which do not transact any business with 
nonmembers or the general public shall not be subject to any government taxes 
or fees imposed under the internal revenue laws and other tax laws. 
Cooperatives not falling under this Article shall be governed by succeeding 
section .] 
“ART. 61. TAX AND OTHER EXEMPTIONS. -ALL COOPERATIVES OF 
SMALL PRODUCERS, SMALL SERVICE PROVIDERS, AND/OR SMALL 
CONSUMERS REGISTERED PURSUANT TO THIS CODE SHALL DURING 
THEIR EXISTENCE BE EXEMPTED FROM ALL TAXES, IMPORT LEVIFS, 
PERMITS, FEES, LICENSES, AND OTHER IMPOSITIONS OF WHATEVER 
NAME 
AND 
NATURE 
WHETHER 
IMPOSED 
BY 
THE 
NATIONAL 
GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES OR BY THE 
LOCAL GOVERNMENT UNITS: PROVIDED, THAT SUCH COOPERATIVES 
ARE CERTIFIED BY THE COOPERATIVE DEVELOPMENT AUTHORITY AS 
COOPERATIVES OF SMALL PRODUCERS, SMALL SERVICE PROVIDERS 
AND/OR SMALL CONSUMERS: PROVIDED, FURTHER, THAT IN ORDER TO 
AVAIL OF THE TAX AND RELATED EXEMPTION PRIVILEGES ABOVE- 
MENTIONED, COOPERATIVES SHALL NOT BE REQUIRED TO SECURE ANY 
CERTIFICATE FROM THE BUREAU OF INTERNAL REVENUE OR FROM THE 
DEPARTMENT OF FINANCE: PROVIDED, FINALLY, THAT THESE TAX AND 
RELATED EXEMPTION PRIVILEGES MAY BE WITHDRAWN FOR CAUSE 
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AND AFTER DUE HEARING BY THE COOPERATIVE DEVELOPMENT 
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AUTHORITY.” 
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SEC. 4. The entire provision of Article 62 of the same Code is hereby 
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“[ART. 
62. 
Tax and other Exemptions. - Cooperatives transacting 
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business with both members and non-members shall not be subject to tax on 
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their transactions to members. Notwithstanding the provisions of any law or 
deleted and a new provision is inserted to read as follows: 
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regulation to the contrary, such cooperatives dealing with nonmembers shall 
enjoy the following tax exemptions: 
x x x ]  
“ART. 
62. 
CANCELLATlON OF TAX EXEMPTIONS. - THE TAX 
EXEMPTIONS AND PRIVILEGES OF ANY REGISTERED COOPERATIVE 
WITH 
MEMBER§ 
WHO 
ARE 
NOT 
SMALL 
PRODUCERS 
AND/OR 
CONSUMERS A§ DEFINED IN THIS ACT SHALL, AFTER DUE HEARING BY 
THE COOPERATIVE 
DEVELOPMENT AUTHORITY, 
IMMEDIATELY BE 
WITHDRAWN. 
THE COOPERATIVE DEVELOPMENT AUTHORITY SHALL 
PROMULGATE THE RULES AND REGULATIONS TO IMPLEMENT THIS 
PROVISION, INCLUDING THE MONITORING OF THE MEMBERS AND 
OPERATIONS OF COOPERATIVE§ BY THE AUTHORITY AND THE RE- 
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AUTHORITY TO BE NECESSARY.” 
REGISTRATION OF ALL COOPERATIVES, IF THE SAME IS FOUND BY THE 
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SEC. 5. Repealing Clause. (a) Sections 100 and 102 of the National 
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Internal Revenue Code, as amended by Republic Act No. 7716, popularly known 
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as the Value Added Tax Law, are hereby amended or modified insofar as they 
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are inconsistent with this Act. 
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(b) All other general and special laws, acts, charters, decrees, executive 
orders, proclamations and administrative regulations, or parts thereof insofar as 
they impose taxes, import levies, permits, fees, licenses, and other impositions of 
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under the Cooperative Code. 
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whatever name and nature, shall have no force and effect on all cooperatives of 
small producers, small service providers, and/or small consumers registered 
SEC. 6. This Act shall take effect fifteen (15) days after its publication in 
at least two (2) newspapers of general circulation. 
Approved, 
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