BIR Ruling

May 11, 1973 Mr. Guillermo A. Castasus Municipal Secretary San Pedro, Laguna S i r : In reply to your letter dated April 10, 1973, I have the honor to inform you that pursuant to Section 11 and 16 of Republic Act No. 3470, as amended by Republic Act No. 5326, otherwise known as the NACIDA law, a cottage industry must be an economic activity in small scale carried on mainly in the homes or in other places for profit and mainly done with the help of the members of the family with capitalization of not exceeding P15,000.00. It is also required that the product or products manufactured, produced and sold are those enumerated in Section 11 of Republic Act No. 3470, as amended, and that 75% of the total cost of raw materials utilized in the production or manufacture of cottage industry products consists of raw materials of Philippine origin, except in cases of embroidery, piggery, poultry, livestock and metal craft industries where the latter requirement as to raw materials shall not apply. If the foregoing requirements are met, a business or an industry shall enjoy the tax exemption provided under Section 16 of Republic Act No. 3470, as amended by Republic Act No. 5326 which provides: "SEC. 16. The production, manufacture and sale of cottage industry products shall be exempt from all taxes, except specific and income taxes, for a period of five years from the date of registration of the person or firm engaged in the production or manufacture of cottage industry products with the Board: Provided , That seventy-five per cent of the total cost of raw materials utilized in the production or manufacture of cottage industry products consists of raw materials of Philippine origin: Provided , further , That the latter requirement as to raw materials shall not apply to embroidery, piggery, poultry, livestock and metal craft industries: Provided , furthermore , That no exemptions from the percentage taxes on sales shall be enjoyed for all sales in excess of two thousand pesos each year. . . ." As regards however, the procedure in acquiring tax exemptions under Republic Act No. 3470, as amended by Republic Act No. 5326, it is requested that you pose your query with the National Cottage Industries Development Authority (NACIDA) who has jurisdiction over the same. Very truly yours, (SGD.) CONRADO P. DIAZ Acting Commissioner of Internal Revenue