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Peruvian co-op law becomes reality
LIMA, Peru (5/27/11)--The government of Peru has passed landmark legislation that recognizes the not-for-profit status of the country’s 160 credit unions and other cooperatives and grants them tax exemption. World Council of Credit Unions’ (WOCCU) member La Federación Nacional de Cooperativas de Ahorro y Crédito del Perú (FENACREP) has worked with a coalition of cooperative advocacy groups on the bill since introduction into the legislature in December 2009. Manuel Rabines Ripalda, first vice chair of WOCCU’s board of directors and president/CEO of FENACREP, said the country’s cooperatives have long struggled to help lawmakers understand that cooperatives’ transactions with members are not designed to produce profit, and therefore should not be taxed. “This is not just about a tax break for cooperatives,” Rabines said. “This law is simply correcting the interpretation of existing cooperative legislation so that tax laws will be properly applied to cooperative acts.” The new law specifies the scope of two articles in Peru’s existing General Law of Cooperatives by recognizing that cooperatives are different from commercial enterprises because their transactions with members are “cooperative acts.” Since these cooperative acts are considered internal--carried out in accordance with the cooperatives’ social objectives--they have no motive for profit. Cooperative acts are not considered a “sale of goods” or “provision of services,” so the sales tax associated with these activities is not applicable, said WOCCU. “Credit unions and other cooperatives have historically had a strong presence in Peru and throughout Latin America,” said Pete Crear, WOCCU president/CEO. “Earning and maintaining the support of government is vital to our global movement, and the enactment of this new law in Peru is a great achievement.”

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