REVENUE MEMORANDUM CIRCULAR NO. 121-2021 issued on December 14, 2021 clarifies the taxability of the interest paid by Cooperatives to its member’s deposit or fixed deposits (otherwise known as share capital).
                   Section 11 of Revenue Memorandum Circular No. 12-10, which circularizes the Joint Rules and Regulations Implementing Articles 60, 61 and 144 of Republic Act No. 9520 (Philippine Cooperative Code of 2008) in relation to RA No. 8424 (National Internal Revenue Code or NIRC, as amended), provides that all members of cooperatives shall be liable to pay all the necessary internal revenue taxes under the NIRC, as amended, except for “any tax and fee, including but not limited to final tax on member’s deposits or fixed deposits (otherwise known as share capital) with cooperatives, and documentary tax on transactions of members with the cooperative”, among others.
                     Member’s deposit refers to savings and time deposits of both regular and associate members while share capital refers to member’s paid up capital. Based on the abovementioned provisions, members of the cooperative are not liable to pay any tax and fee on the interest earned on member’s deposits and fixed deposits (share capital). Hence, cooperatives are also not liable to withhold tax on the aforesaid interest payments to members.