BIR Ruling [DA-050-96]

February 2, 1996 BIR RULING [DA-050-96] Hon. William G. Padolina Secretary of Science & Technology Bicutan, Taguig, Metro Manila Attention: Mr . William G . Padolina Secretary Gentlemen : This refers to your letter dated September 13, 1995 indorsing among others, the request of Mr. Manuel Corleto, proprietor of Econotrade, Inc., 23 Calderon St., Calumpang, Marikina, Metro Manila, for tax exemption under R.A. No. 7459 otherwise known as the "Inventors and Invention Incentives Act of the Philippines. cdta It is represented that Mr. Manuel Corleto is an inventor and duly certified by the Filipino Inventors Society, Inc. (FIS); that he alleged that he has inventions entitled: An Adjustable Appliance UM 5475 2-27-84 Mobile Rack Appliance Mobile Stand UM 7321 1-29-92 Towing Arm Devise UM 7686 10-06-93 Demountable Rack UM 7717 12-17-93 Drink Service Rack UM 7890 05-26-95 A Knockdown Cabinet UM 5518 06-04-93 Combined Bathroom & Towel Rack UM 12591 06-04-93 Multipurpose Clothes & Hanger Rack UM 7896 05-26-95 A Convertible Ladder & Planters Rack UM 7889 05-26-95 Knockdown Merchandising Rack UM 12535 04-21-93 Knockdown Video Appliances Rack UM 7901 05-26-95 Knockdown Video Appliances Rack UM 7901 05-26-95 Knockdown Video Appliances Rack UM 7900 05-26-95 Knockdown Kitchen Mobile Rack UM 13160 06-06-94 Foldable Towel Rack UM 13444 11-04-94 Knockdown Disk Rack UM 13764 05-04-95 Knockdown Disk Rack UM 13789 05-22-95 A Stool D 6673 04-05-95 A Stool D 6721 04-05-95 A Stool D 6676 04-05-96 Bench D 9828 01-26-94 Clothes Hanger D 6176 09-21-94 Clothes Hanger D 6175 09-21-94 Bathroom Rack D 6177 09-21-94 that said inventions were already screened and evaluated by FIS; that said inventions are now already on commercial scale. In reply, please be informed that pursuant to Section 3 (C) of Revenue Regulations No. 19-93, implementing R.A. No. 7459, stating: "SEC. 3. Tax Incentives and Tax Exemption : xxx xxx xxx C. The inventor shall be exempt from the following taxes for which otherwise he shall have been directly liable: (a) Income tax on the net income derived from the sale of invention products resulting from newly discovered/developed technologies by local researches or technology adopted from foreign sources whether it be patented machine, product, process including implements or tools and other related gadgets of invention, utility model and industrial design patents; (b) Value-added tax (VAT) on the gross receipts/revenues derived from the sale of said invention products, provided, however, that an inventor shall not be exempt from taxes for which he is not directly liable, e.g., VAT on his purchases of raw materials, supplies and equipment/machineries, which may be shifted to him as part of cost of goods sold or for services rendered; (c) Excise taxes directly payable in connection with the sale of invention products; the privilege of Mr. Manuel Corleto shall include exemptions from income tax, value-added tax and excise tax, for a period of ten (10) years from the date of first sale. However, Pilipino inventors enjoying the said tax exemption privileges shall be subject to the 20% final withholding tax on interest from Philippine currency bank deposits, yield or any other monetary benefit from deposit substitutes, trust fund and similar arrangements, and from capital gains tax on sales of real property and shares of stock prescribed under Section 21 (e) and (d) of the Tax Code, as amended. [BIR Ruling No. UN160-95 dated April 12, 1995]. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head, Revenue Executive Assistant (Legal Service)