CTA sets aside MisOr power co-op’s tax liabilities based on 2013 reform law 

THE COURT of Tax Appeals (CTA) has granted Misamis Oriental (MisOr) II Rural Electric Service Cooperative, Inc.’s appeal to set aside its 2015 income tax liabilities worth P21.35 million and penalties amounting to P25,000. 

In a 22-page decision dated Feb. 28 and made public on Mar. 1, the CTA Special Second Division said the utility was entitled to an income tax exemption under the National Electrification Administration (NEA) Reform Act of 2013 or Republic Act No. 10531.   

“Existing electric cooperatives may likewise opt to register as stock corporations with the Securities and Exchange Commission and shall continue to enjoy the benefits under this act,” the tribunal said.  

Under the law, electric cooperatives registered with NEA are exempt from income taxes, franchise tax, value-added tax and all national government fees.  

Cooperatives are also given the option to remain non-stock and non-profit.  

The CTA said the entity is engaged in generating and distributing electricity and is exempt from income taxes as provided by the country’s tax code.  

In a legal opinion in December last year, the Department of Justice said all electric cooperatives (ECs) may apply for tax exemptions without prior registration with the Cooperative Development Authority (CDA).  

“Notably, no other requirement for the availment of these preferential rights, other than the compliance of electric cooperatives with the financial and operational standards set by the NEA, like the supposed CDA registration, is mentioned in the law,” Justice Secretary Jesus Crispin C. Remulla said in the opinion. 

It overturned a 2014 department opinion that said electric cooperatives are still liable to pay local taxes and real property taxes.  

“At any rate, even in the absence of any categorical ruling by the Supreme Court on the matter, the above disquisitions still make it clear that at the present, the NEA law is the governing law insofar as ECs are concerned,” the tax tribunal said.  

The Misamis Oriental II co-op distributes electricity in Gingoog City and 12 towns in the southern Philippine province. — John Victor D. Ordoñez