Mandatory reserve fund: the part that stays inside
It is what makes a cooperative fundamentally different from a capital company: part of the surplus is never shared out, not even on winding up.
The non-distributable reserve to which a cooperative has to allocate a minimum percentage of its surplus each year.
Article 58 of Ley 27/1999, on cooperatives, sets the minimums. Out of the cooperative surplus, once losses from earlier years have been deducted and before Corporation Tax is taken into account:
- At least 20% to the mandatory reserve fund.
- At least 5% to the education and promotion fund.
And out of non-cooperative and extraordinary profits, at least 50% to the mandatory reserve fund. Article 55 declares it non-distributable among the members: it is not shared out during the cooperative's life or on liquidation.
Check first which act applies to you
Almost every autonomous community has its own cooperatives act, and the percentages can differ. Ley 27/1999 applies only to cooperatives operating nationally, or where the regional act refers to it. Check which one governs your cooperative before allocating anything.
An example with numbers
A workers' cooperative with €60,000 of cooperative surplus and no losses brought forward:
- Mandatory reserve fund, 20%: €12,000
- Education and promotion fund, 5%: €3,000
- Available for tax, retorno and voluntary reserves: €45,000
The statutes can set higher percentages, and many cooperatives do so in order to build up capital.
The mistake that comes up most
Sharing out the whole surplus among the members because “it has been a good year”. The allocations are compulsory and come first: sharing out without making them is a decision that can be challenged and it throws out the equity on the following year's balance sheet.
Where this carries on in Cairos: Cooperatives: funds, returns and accounting.
Terms that go with this one
Almost no tax concept makes sense on its own. These three are the ones that most often turn up beside it.
Retorno cooperativo
The share of the distributable surplus that a cooperative pays out to its members in proportion to the cooperative activity each of them has carried out.
AccountingAnnual accounts
The set of documents with which a company closes its financial year, which its general meeting approves and which it files at the Registro Mercantil.
Non-profit bodiesAnnual financial report
The document in which a non-profit body sets out its income and expenditure for the year, identified by category and by project.
This, handled without thinking about it
Cairos keeps the invoices, the record books and Hacienda's forms from the same data, so the theory on this page turns into boxes that are already filled in.
No card and no minimum term.