If a Philippine cooperative pays an honorarium, per diem, allowance, or “token” to its officers, directors, or committee members, the usual question is: should the cooperative withhold tax? In most cases, yes. A cooperative may enjoy tax exemptions under the Cooperative Code, but that does not automatically make the officer’s honorarium tax-free. The correct treatment depends on one practical point: is the officer an employee of the cooperative, or is the officer receiving the amount as a non-employee director, committee member, or service provider?

What “honorarium” means for tax purposes

In everyday cooperative practice, “honorarium” may refer to:

a board meeting per diem;
an allowance for directors or committee members;
payment to the chairperson, vice-chairperson, treasurer, secretary, audit committee, election committee, mediation committee, or ethics committee;
a fixed monthly amount for services rendered;
a one-time incentive after a project or activity; or
reimbursement for travel, meals, communication, or meeting expenses.

For tax purposes, the label is not controlling. The BIR looks at the real nature of the payment.

If it is payment for services, attendance, duties, or work, it is generally income to the recipient. If it is a genuine reimbursement of expenses actually incurred for cooperative business, properly supported by receipts and liquidation, it may be treated differently.

The most common mistake is assuming that because the payor is a tax-exempt cooperative, the payee is also exempt. That is not how withholding tax works.

General rule: cooperative officers’ honorarium is usually taxable

A cooperative officer’s honorarium is generally taxable income unless a specific law exempts that particular income. The cooperative’s tax exemption under Republic Act No. 9520, the Philippine Cooperative Code of 2008, mainly benefits the cooperative and certain member-cooperative transactions. It does not automatically exempt compensation, directors’ fees, honoraria, or service income received by individual officers.

The BIR has also clarified in Revenue Memorandum Circular No. 124-2020 that cooperative members remain liable for necessary internal revenue taxes under the National Internal Revenue Code, except for specific exempt items such as final tax on members’ deposits and documentary stamp tax on member-cooperative transactions.

In simple terms:

Payment	Usually tax-exempt?	Why
Interest on qualifying members’ deposits in a cooperative engaged in lending	Yes	Specifically covered by cooperative tax exemption rules
Patronage refund or interest on share capital, if properly treated under cooperative rules	Often subject to special cooperative tax treatment	Depends on facts and applicable cooperative tax rules
Officer’s honorarium, director’s fee, per diem, or allowance for services	Usually no	This is income of the officer
Actual reimbursement with receipts and liquidation	Often not income	The officer is merely being reimbursed for cooperative expenses
Fixed allowance without liquidation	Usually taxable	It functions like compensation or service income

Legal basis: why cooperatives still withhold tax

RA 9520 allows compensation, but it does not make all honoraria tax-free

Article 46 of RA 9520 governs compensation of cooperative directors, officers, and committee members. It provides that, unless the bylaws fix compensation, directors generally do not receive compensation except reasonable per diems. It also restricts per diems when the cooperative reported a net loss or had a dividend rate below the official inflation rate in the preceding year.

RA 9520 also says that compensation other than per diems may be granted to directors by majority vote of members with voting rights in a regular or special general assembly meeting called for that purpose. The compensation of officers and committee members may be fixed in the bylaws.

This matters because a tax issue often starts as a governance issue. Before computing withholding tax, the cooperative should first ask:

Is the honorarium allowed under the bylaws?
Was it approved by the proper body?
Is it supported by a board or general assembly resolution?
Is it reasonable and properly recorded?
Did the cooperative report a net loss or fail the dividend-rate condition that affects directors’ per diems?

A payment can be taxable even if it was poorly authorized. But poor authorization creates a separate cooperative governance problem with the CDA and the members.

Cooperatives are withholding agents

Under BIR rules, cooperatives are generally considered withholding agents. This means that when a cooperative makes an income payment subject to withholding tax, it must deduct the required tax, remit it to the BIR, file the correct returns, and issue the proper certificate to the payee.

Revenue Regulations No. 20-2001 states that cooperatives, regardless of classification, are considered withholding agents and are required to file withholding tax returns and remit withholding taxes on income payments subject to withholding.

The Supreme Court has also explained that the liability of the withholding agent is separate from the tax liability of the income earner. In Commissioner of Internal Revenue v. La Flor Dela Isabela, Inc., G.R. No. 211289, January 14, 2019, the Court emphasized that a withholding agent may be liable for deficiency withholding taxes and penalties if it fails to withhold the required amount.

The correct withholding tax treatment depends on the officer’s status

The first step is not to ask, “Is this called honorarium?” The first step is to classify the recipient.

1. If the officer is an employee of the cooperative

If the cooperative officer is also an employee of the cooperative, the honorarium is generally treated as compensation income or supplemental compensation.

Examples:

the general manager receives a performance honorarium;
the accountant-bookkeeper receives an extra allowance for year-end work;
an employee-treasurer receives additional pay from the same cooperative;
a staff member receives honorarium for acting as project coordinator.

In this case, the cooperative usually withholds tax using the withholding tax on compensation rules under Section 79 of the National Internal Revenue Code and BIR regulations.

The payment is reported through the compensation withholding system, not as expanded withholding tax.

Common forms:

Compliance item	Usual form
Monthly withholding on compensation	BIR Form 1601-C
Employee certificate	BIR Form 2316
Annual information return for compensation	BIR Form 1604-C with alphalist

If the officer is a managerial or supervisory employee and receives non-cash benefits such as housing, vehicle use, club dues, or similar benefits, fringe benefit tax rules may also become relevant under Section 33 of the Tax Code.

2. If the director is not an employee of the cooperative

If the director is not an employee and the payment is for attendance and participation in board meetings, the amount is usually treated as a director’s fee, per diem, allowance, or similar income subject to creditable withholding tax, also called expanded withholding tax or EWT.

Under Revenue Regulations No. 11-2018, fees of directors who are not employees of the company paying the fees are included among income payments subject to creditable withholding tax. The regulation also states that amounts subject to withholding include not only fees but also per diem fees, allowances, and other forms of income payments not subject to withholding tax on compensation.

For individual payees under this category, the usual rates are:

Situation	Usual EWT rate
Individual payee submits the required sworn declaration and Certificate of Registration, and gross receipts/sales do not exceed ₱3,000,000	5%
Individual payee does not submit the required documents, or income exceeds ₱3,000,000	10%

This is why many cooperatives withhold 10% from directors who do not provide the required BIR documents. It is not always because 10% is the default legal rate for every situation. Often, it is because the officer has not submitted the documents needed to apply the lower 5% rate.

3. If the officer or committee member is not an employee and is not clearly a director

For non-employee committee members and officers who receive honoraria, the classification can be more fact-specific.

Examples:

audit committee honorarium;
election committee honorarium;
mediation committee honorarium;
ethics committee allowance;
secretary’s honorarium where the secretary is not an employee;
treasurer’s honorarium where the treasurer is an elected or appointed officer, not payroll staff.

The BIR’s Revenue Memorandum Circular No. 50-2018 explains that the nature of the service determines the applicable withholding tax rate. Services covered by Section 2.57.2(A) of RR No. 11-2018 use the rates under that section. Other services not under that section may be subject to 2% withholding.

In practice, the cooperative should document why it used a particular rate. For board directors, the director-fee rule is usually clearer. For committee members, the safer approach is to classify based on the person’s actual role, documents, and whether the payment is for professional-type services or ordinary non-professional services.

4. If the payment is a genuine reimbursement

Actual reimbursement is different from honorarium.

A reimbursement is stronger if:

the expense was for cooperative business;
the officer submitted receipts or acceptable proof;
the amount was liquidated;
the cooperative recorded the expense under the proper account; and
the officer did not profit from the reimbursement.

For example, if a director travels from a province to attend a board meeting and submits bus tickets, hotel receipts, and meal receipts within the cooperative’s policy, the reimbursed amount may be treated as reimbursement rather than taxable honorarium.

But if the cooperative gives every director a fixed ₱3,000 “transportation allowance” every meeting without receipts or liquidation, the BIR may treat it as taxable income, even if the cooperative internally calls it reimbursement.

Step-by-step guide for cooperatives paying officers’ honorarium

Step 1: Confirm that the payment is valid under cooperative rules

Before tax computation, check the cooperative’s:

Articles of cooperation;
bylaws;
general assembly resolutions;
board resolutions;
approved budget;
CDA-related policies;
prior year financial statements, especially if directors’ per diems are affected by net loss or dividend-rate conditions.

For directors, Article 46 of RA 9520 is especially important. A cooperative should not treat tax withholding as a cure for an unauthorized payment. Withholding tax compliance and cooperative governance compliance are separate issues.

Step 2: Identify the recipient’s status

Ask:

Is the recipient an employee of the cooperative?
Is the recipient a non-employee director?
Is the recipient a committee member?
Is the recipient a professional or consultant?
Is the recipient a resident citizen, resident alien, nonresident citizen, or nonresident alien?
Is the service performed in the Philippines?

The answer determines whether the cooperative uses compensation withholding, expanded withholding tax, or final withholding tax rules.

Step 3: Secure the officer’s tax information

At minimum, the cooperative should have:

Document or information	Why it matters
Full legal name	Needed for BIR forms and alphalists
TIN	Required for withholding tax reporting
Address	Needed for BIR records
Employment status	Determines WTC vs EWT
BIR Certificate of Registration, if applicable	Relevant for non-employee service income
Sworn declaration of gross receipts/sales, if applicable	Needed for lower EWT rate
Board/GA resolution or bylaw basis	Supports the legality of the honorarium
Disbursement voucher and proof of payment	Audit trail
Receipts and liquidation, if reimbursement	Supports non-income treatment

A cooperative with a Certificate of Tax Exemption should also maintain its own CTE records, but the CTE is not a substitute for the officer’s tax documents.

Step 4: Compute withholding on the gross amount

Withholding tax is usually computed on the gross income payment, not the net amount the officer wants to receive.

Example:

A cooperative approves a ₱5,000 director’s honorarium. The director is not an employee and did not submit documents for the 5% rate. The cooperative applies 10% EWT.

Gross honorarium: ₱5,000
EWT at 10%: ₱500
Net amount paid to director: ₱4,500

If the cooperative promised the director a net amount of ₱5,000 after tax, it may need to gross up the payment.

Example using 10% EWT:

Desired net pay: ₱5,000
Grossed-up amount: ₱5,000 ÷ 90% = ₱5,555.56
EWT at 10%: ₱555.56
Net paid: ₱5,000

This should be clearly approved and recorded because grossing up increases the cooperative’s actual expense.

Step 5: Remit the tax using the correct BIR form

For expanded withholding tax, the usual filing pattern is:

Period	Usual form	Usual deadline
First two months of each quarter	BIR Form 0619-E	On or before the 10th day following the month of withholding
End of each quarter	BIR Form 1601-EQ with quarterly alphalist	Not later than the last day of the month following the close of the quarter
Annual summary	BIR Form 1604-E with alphalist	On or before March 1 of the following year

For compensation withholding:

Compliance item	Usual form	Usual deadline
Monthly compensation withholding	BIR Form 1601-C	Usually 10th day of the following month; December is generally due January 15
Employee certificate	BIR Form 2316	Generally on or before January 31 of the following year, or upon final payment after separation
Annual compensation summary	BIR Form 1604-C with alphalist	Generally January 31 of the following year

eFPS filers may have staggered filing schedules depending on BIR classification. Deadlines may also move when they fall on weekends, holidays, or under specific BIR advisories.

Step 6: Issue the correct certificate to the officer

For EWT, issue BIR Form 2307 to the officer. This certificate allows the officer to claim the tax withheld as a credit against income tax due.

For compensation income, issue BIR Form 2316.

This distinction is important. A non-employee director who receives Form 2307 generally still needs to consider annual income tax filing obligations. An employee receiving purely compensation income from one employer may qualify for substituted filing if all legal conditions are met.

Step 7: Reconcile the books, returns, and certificates

Before year-end, the cooperative should reconcile:

honorarium expense per books;
amounts actually paid;
taxes withheld;
BIR Form 0619-E payments;
BIR Form 1601-EQ quarterly filings;
BIR Form 2307 certificates issued;
annual BIR Form 1604-E alphalist;
compensation records, if any, under BIR Forms 1601-C, 2316, and 1604-C.

Many BIR problems arise not because the cooperative withheld the wrong rate, but because the amounts in the voucher, books, 2307, quarterly return, and alphalist do not match.

Common scenarios

Scenario 1: Board directors receive monthly per diem

A primary cooperative pays each director ₱2,000 per board meeting. The directors are not employees. The payment is for attendance and participation in board meetings.

This is generally treated as director’s fees or per diem subject to EWT. If a director submits the required BIR documents and qualifies, the cooperative may apply the lower rate. Without the documents, the cooperative commonly applies the higher rate.

Scenario 2: The chairperson receives a fixed monthly honorarium

A chairperson receives ₱8,000 monthly for governance work. The chairperson is not an employee.

The cooperative should first check if the payment is allowed under the bylaws or approved by the general assembly where required. For tax, it is generally income subject to withholding. The classification may follow director-fee or service-income rules depending on the chairperson’s legal role and documents.

Scenario 3: The general manager receives an extra honorarium

The general manager is a regular employee on payroll. The cooperative gives an additional ₱20,000 honorarium for completing a major project.

This is usually supplemental compensation subject to withholding tax on compensation, not EWT. It should go through payroll and appear in the employee’s BIR Form 2316.

Scenario 4: Audit committee members receive honoraria

Audit committee members are elected by the general assembly and are not employees. They receive a quarterly honorarium.

The cooperative should review the bylaws and resolutions authorizing the payment. For tax, the cooperative should classify the payment based on the nature of the service and the applicable BIR withholding category. Documentation is especially important because committee honoraria are sometimes less clearly classified than board directors’ fees.

Scenario 5: The cooperative reimburses travel expenses

A director attends a meeting in another city and submits receipts for bus fare and lodging. The cooperative reimburses the exact amount.

If properly supported and liquidated, this is more defensible as reimbursement rather than taxable honorarium. But if the cooperative pays a fixed travel allowance without receipts, it is more likely to be treated as taxable income.

Scenario 6: The cooperative says, “We have a BIR Certificate of Tax Exemption”

The CTE helps the cooperative claim tax exemptions available under RA 9520 and related BIR rules. It does not automatically exempt officers from tax on their own honoraria. The cooperative may still be required to withhold and remit tax on income payments to officers.

Special issues for foreign officers or nonresident recipients

Foreigners are less common as cooperative officers because cooperative membership, voting rights, sector rules, and nationality restrictions may matter depending on the type of cooperative and its activities. RA 9520 generally requires directors to be qualified members with voting rights, and the cooperative’s bylaws may impose additional qualifications.

For tax purposes, a foreign recipient must be classified carefully:

Recipient	Practical tax issue
Resident alien	Generally taxed on Philippine-sourced income under applicable individual tax rules
Nonresident alien engaged in trade or business in the Philippines	May be taxed under rules applicable to Philippine-sourced income
Nonresident alien not engaged in trade or business	Often subject to final withholding tax on Philippine-sourced fixed or determinable income, commonly 25%, subject to treaty rules
Foreign recipient claiming treaty relief	Needs proper documentation and compliance with BIR treaty procedures

If a foreign officer attends meetings abroad or renders services outside the Philippines, source-of-income and treaty issues may arise. The cooperative should keep records showing where the services were performed, the officer’s residency status, travel dates, board minutes, and the basis for the withholding treatment used.

Common mistakes cooperatives should avoid

Treating all honoraria as tax-free because the payor is a cooperative

This is the most common error. Cooperative tax exemption is not a blanket exemption for every person who receives money from the cooperative.

Calling a taxable allowance “reimbursement” without receipts

A reimbursement should be supported. A fixed allowance without liquidation is risky.

Using 5% EWT without the required documents

The lower 5% rate for certain individual payees generally requires the required sworn declaration and Certificate of Registration. Without them, the cooperative may be exposed in a BIR audit.

Paying directors without checking RA 9520 and the bylaws

Even if tax was withheld, the payment may still be questioned internally if it was not authorized under the Cooperative Code, bylaws, or general assembly resolution.

Issuing the wrong certificate

A non-employee payee usually needs BIR Form 2307. An employee receives BIR Form 2316. These forms are not interchangeable.

Forgetting the alphalist

The BIR can match certificates, returns, and alphalists. Missing or inconsistent alphalist data can create problems for both the cooperative and the officer.

Assuming small amounts do not matter

Small honoraria can still be reportable. A cooperative with many officers and committee members may accumulate significant annual withholding exposure even if each payment looks small.

Documents and records to keep

Record	Minimum practical purpose
Articles of Cooperation and bylaws	Shows authority for officer compensation
Board resolution	Approves specific payment or policy
General assembly resolution, if required	Supports director compensation beyond per diems
Attendance sheets and minutes	Proves meeting attendance or services rendered
Approved budget	Shows the expense was authorized
Disbursement voucher	Links approval, computation, and payment
TIN records	Needed for BIR reporting
COR and sworn declaration, if applicable	Supports lower EWT rate
BIR payment confirmations	Proof of remittance
BIR Form 2307 or 2316	Certificate issued to recipient
Quarterly and annual alphalists	Supports BIR reporting
Receipts and liquidation reports	Supports reimbursement treatment
CDA Certificate of Good Standing and BIR CTE	Supports cooperative tax-exemption compliance

Under RA 9520, cooperatives must keep books and records available for inspection. Tax records should also be retained consistently with BIR recordkeeping rules, especially because withholding tax issues often arise years after the payment.

What happens if the cooperative fails to withhold?

If a cooperative fails to withhold, under-withholds, or withholds but does not remit, the BIR may assess the cooperative for withholding tax deficiencies, surcharge, interest, and compromise penalties. The responsible officers may also face issues depending on the facts and degree of noncompliance.

The BIR’s penalties page explains the general surcharge rules for late filing or payment. For micro and small taxpayers, the Ease of Paying Taxes Act, Republic Act No. 11976, and Revenue Regulations No. 6-2024 introduced reduced penalty rates in certain cases. Still, reduced penalties do not remove the basic duty to withhold and remit.

For cooperatives, the bigger practical risk is often the combination of:

BIR assessment exposure;
CDA governance issues;
audit findings by internal or external auditors;
disputes among members over unauthorized benefits;
difficulty renewing or maintaining tax exemption documents; and
inability of officers to claim tax credits because certificates were not issued correctly.

Frequently Asked Questions

Is honorarium received by cooperative officers taxable in the Philippines?

Yes, in most cases. Honorarium paid to cooperative officers, directors, or committee members is generally taxable income unless a specific exemption applies. The cooperative’s own tax exemption does not automatically exempt the recipient.

What withholding tax rate applies to cooperative directors’ honorarium?

If the director is not an employee and the payment is a director’s fee, per diem, or allowance, it is commonly subject to EWT under RR No. 11-2018. For individual payees, the rate is generally 5% if the required documents are submitted and the payee qualifies; otherwise, 10% may apply.

Is directors’ per diem in a cooperative tax-free?

Not automatically. RA 9520 may allow reasonable per diems under certain conditions, but that does not automatically make the per diem exempt from income tax. For tax purposes, per diem fees and allowances may still be subject to withholding.

If the cooperative officer is also an employee, should the honorarium be under EWT?

Usually no. If the officer is an employee of the same cooperative, the honorarium is generally treated as compensation or supplemental compensation subject to withholding tax on compensation.

Should the cooperative issue BIR Form 2307 or BIR Form 2316?

Issue BIR Form 2307 for income payments subject to expanded withholding tax, such as non-employee director’s fees. Issue BIR Form 2316 for employees receiving compensation income.

Can the cooperative apply 5% withholding without the officer’s sworn declaration?

Generally, the lower 5% rate requires the proper sworn declaration and supporting BIR registration documents. If the officer does not submit the required documents, the cooperative commonly applies the higher rate.

Are reimbursements to cooperative officers subject to withholding tax?

Genuine reimbursements supported by receipts and liquidation are generally not treated the same as honorarium. But fixed allowances without proof of actual expenses may be treated as taxable income.

Does a BIR Certificate of Tax Exemption exempt the cooperative from withholding on honoraria?

No. The CTE supports the cooperative’s own tax exemption under cooperative tax rules. It does not automatically exempt officers, directors, or committee members from tax on income they receive.

Do cooperative officers need to report honorarium in their income tax return?

For non-employee officers receiving income covered by BIR Form 2307, the amount is generally creditable withholding tax and may need to be reported in the recipient’s income tax return. Employees receiving compensation income may be covered by substituted filing only if all conditions are satisfied.

What if the cooperative already paid the honorarium without withholding tax?

The cooperative should reconstruct the records, determine the correct classification and amount, file or amend the relevant withholding tax returns if needed, pay the tax and applicable penalties, and issue corrected certificates. The longer the issue remains unresolved, the more difficult reconciliation becomes.

Key Takeaways

Cooperative officers’ honorarium is usually taxable unless a specific exemption applies.
A cooperative’s tax exemption does not automatically exempt officers, directors, or committee members from tax on honoraria.
If the officer is an employee, the payment is generally handled as compensation and reported through BIR Forms 1601-C, 2316, and 1604-C.
If the officer is a non-employee director, the payment is commonly subject to expanded withholding tax, with BIR Form 2307 issued to the payee.
The commonly applied EWT rate for individual non-employee directors is 5% if properly documented and qualified, or 10% if not.
Per diems and allowances may still be taxable even if allowed under the cooperative’s bylaws or RA 9520.
Genuine reimbursements should be supported by receipts, liquidation, and proper accounting records.
The cooperative should keep resolutions, minutes, vouchers, TIN records, certificates, and alphalists because withholding tax compliance is document-heavy.
Failure to withhold can expose the cooperative to BIR assessments, penalties, and audit findings even if the cooperative has a Certificate of Tax Exemption.