Are all sales by an agricultural cooperative exempt from VAT?

Not automatically. Under NIRC Section 109(1)(L), a CDA-registered agricultural cooperative's sales to its own members are VAT-exempt regardless of the product. Sales to non-members are exempt only if the cooperative is the actual producer of the agricultural product sold — not merely a trader reselling produce it bought from outside parties.

What does 'the cooperative is the producer' actually require?

The Joint Rules implementing Articles 60, 61, and 144 of RA No. 9520 treat the cooperative as the producer when its members grew the raw agricultural product and the cooperative supplied inputs, financing, technology, or farm management support, or processed the members' harvest in the cooperative's own name. Produce grown or processed by non-members, or activity unrelated to the purposes stated in the cooperative's articles of cooperation, does not count as the cooperative's own production even if sold under its name.

Does this exemption cover advance VAT, like the advance VAT collected on sugar withdrawals?

Philippine jurisprudence on agricultural cooperative VAT exemption has treated an exemption on sales to members or qualifying non-member sales as extending to advance VAT collected at the point of withdrawal (for example, sugar withdrawn from a mill), since advance VAT is a prepayment mechanism for the same output VAT the sale would otherwise owe. Confirm current treatment with the BIR before relying on this for a withdrawal that is not a straightforward member or qualifying-producer sale.

What if the cooperative only trades produce it didn't grow?

Then only its sales to its own members remain VAT-exempt under NIRC Section 109(1)(L) and RA 9520. Its sales of the same produce to non-members are not exempt under the agricultural-cooperative rule, because the cooperative did not produce what it is selling — though a separate, product-based exemption may still apply if the goods are agricultural food products in their original state, which are VAT-exempt regardless of seller or buyer.

What proof does the BIR require to apply the exemption?

The cooperative needs a current Certificate of Registration from the Cooperative Development Authority (CDA), not an accreditation from another agency, and records showing it is registered as an agricultural cooperative under the purposes stated in its articles of cooperation. BIR Revenue Memorandum Circular No. 90-2026 has reaffirmed that only a CDA certificate — not a comparable certificate from another body — qualifies a cooperative for BIR tax exemption.

VAT Exemption for Agricultural Cooperatives Selling Members' Produce: NIRC Section 109(1)(L) and RA 9520

A Cooperative Development Authority (CDA)-registered agricultural cooperative can sell its members’ produce free of VAT to anyone — but only if the cooperative is the actual producer of what it sells. Sales to its own members are VAT-exempt outright under NIRC Section 109(1)(L); sales to non-members are exempt only on produce the cooperative itself grew, financed, or processed through its members — not on produce it simply bought and resold.

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The two-tier exemption: members vs. non-members #

NIRC Section 109(1)(L) exempts from VAT the sale by agricultural cooperatives duly registered with the CDA of their produce, whether in its original state or processed form, under conditions tied to who the buyer is. The practical rule that Philippine courts and the BIR apply splits cleanly along membership lines: a cooperative dealing only with its own members has every sale exempt, no matter what it sells; a cooperative that also sells to non-members keeps the exemption on those non-member sales only for produce that is genuinely the cooperative’s own.

Why the “producer” test exists — and what it actually checks #

Each ## heading on this topic keeps circling back to one question, because it is the one the BIR actually audits: did the cooperative produce the goods, or did it just trade them? The Joint Rules implementing Articles 60, 61, and 144 of Republic Act No. 9520 (the Philippine Cooperative Code) draw the line this way:

Sales by agricultural cooperatives to non-members can only be exempted from VAT if the producer of the agricultural products sold is the cooperative itself. If the cooperative is only a trader, only those sales to its members shall be exempted from VAT.

A cooperative counts as the producer when its members grew the raw crop and the cooperative supplied inputs, capital, technology transfer, or farm management services, or when the cooperative processed members’ raw harvest under its own name — consistent with BIR Revenue Memorandum Circular No. 40-2015, which applied the same producer test to sugar withdrawn by an agricultural cooperative from a mill. Produce grown or processed by non-members, or any activity falling outside the purposes stated in the cooperative’s articles of cooperation, is not treated as the cooperative’s own production, even if the cooperative books and sells it under its own name.

Worked example: a sugarcane cooperative selling to a trading company #

San Isidro Agricultural Cooperative, a CDA-registered cooperative, supplies seed cane, fertilizer, and farm-management services to its 200 member-farmers, who grow the sugarcane on their own land and deliver it to the cooperative’s mill allocation. The cooperative withdraws 5,000 sacks of refined sugar from the mill and sells 3,000 sacks to its own members (for their household and resale use) and 2,000 sacks to an unrelated non-member trading company.

Sale to the 200 members (3,000 sacks): Exempt from VAT in full under Section 109(1)(L) — the buyer is a member, so the producer test doesn’t even need to be reached.
Sale to the non-member trading company (2,000 sacks): Exempt from VAT only because San Isidro supplied the inputs and farm management that make it the producer under the Joint Rules, not merely a sugar trader. Had San Isidro instead bought raw cane from outside growers and simply processed and resold it, this non-member sale would not qualify, and San Isidro would need to charge and remit output VAT on it.

What a cooperative that is only a trader should do instead #

A cooperative that genuinely buys produce from non-member growers and resells it has not lost all tax relief — it has just lost this specific exemption on non-member sales. Its sales to members are still exempt under Section 109(1)(L). Separately, if the product itself qualifies as an agricultural food product in its original state (unprocessed grains, fresh vegetables, fresh fruit, livestock, and similar), that sale is VAT-exempt regardless of who the seller or buyer is, under the general agricultural-food-products exemption in the VAT regulations — a different basis than the cooperative-specific rule, and one worth checking before assuming a non-member sale is fully taxable.

Scenario	Buyer	Cooperative is the producer?	VAT treatment
Sells own members’ sugar	Member	N/A	Exempt (Sec. 109(1)(L))
Sells own members’ sugar	Non-member	Yes	Exempt
Resells sugar bought from outside growers	Member	N/A	Exempt (Sec. 109(1)(L))
Resells sugar bought from outside growers	Non-member	No	Taxable, unless the separate agricultural-food-products-in-original-state exemption applies

Registration proof the BIR will ask for #

The exemption depends on the cooperative holding a current CDA Certificate of Registration as an agricultural cooperative, consistent with its stated purposes in its articles of cooperation — the BIR has reaffirmed in RMC No. 90-2026 that only a CDA certificate, not a comparable certificate issued by another regulatory body, satisfies this requirement for cooperative tax exemption generally. A cooperative should keep its CDA registration current and be ready to show, for any non-member sale it treats as exempt, the input-supply, financing, or processing records that establish it — not just the member — as the agricultural produce’s actual producer.

Summary #

An agricultural cooperative’s VAT exemption under NIRC Section 109(1)(L) is unconditional for sales to its own members, but conditional for sales to non-members: the cooperative must be the actual producer of what it sells, per the Joint Rules implementing RA 9520 Articles 60 and 61 and BIR RMC No. 40-2015’s application of that test to sugar withdrawals. A cooperative that is only a trader of produce it did not grow, finance, or process keeps the member-sale exemption but loses it on non-member sales of that same produce, unless a separate product-based exemption applies. See the site’s broader explainer on cooperative income tax and VAT exemption under RA 9520 and the full VAT-exempt transactions list under Section 109 for how this fits into the wider exemption framework.