BIR Ruling [DA-058-01]

April 2, 2001 BIR RULING [DA-058-01] R.A. 7459 138-98 VeraLuz International Corporation suite 1803, 18 th Floor Antel Global Corporate Center Doa Julia Vargas Ave., cor. Meralco Avenue Ortigas Center, Pasig City Attention: Ms . Luz de Vera President & Chairperson Gentlemen : This refers to your letter dated December 8, 2000 requesting for tax exemption pursuant to the provisions of Republic Act No. 7459, otherwise known as "Inventors and Inventions Incentives Act of the Philippines." Documents submitted disclosed that BIR Ruling No. DA-419-2000 dated December 12, 2000 has been issued exempting you from the payment of income, VAT and excise taxes pursuant to Republic Act No. 7459, as implemented by Revenue Regulations No. 19-93; that Ms. De Vera is the President of VeraLuz International Corporation, a domestic corporation engaged in export and local marketing of herbal products, personal and household care products, and other health and body essentials; that the company's herbal and natural product lines won the grand slam award for Best Product Display and Product Design at the Exhibition organized by the Philippine Chamber of Herbal and Natural Health Industries held at Shangrila Hotel Manila last March 30, 1996; that its Tawas Acapulco won the Bronze Award while the Granules won the silver Gild Award at the Salon International de Inventions 1996 at Geneva, Switzerland; and that hereunder is an additional list of your patented inventions that are commercially produced: Patent No. Title Date Issued UM 2-1996-14757 Pure Herbal Soap Granules Sept. 21, 1999 UM 2-1997-15301 Internal Cleansing Tea Sept. 21, 1999 UM 2-1997-15302 Slimming Tea Sept. 21, 1999 UM 2-2000-00015 Collagen Enzyme Soap June 13, 2000 UM 2-2000-00016 Antimicrobial, Antifungal and Skin June 13, 2000 Whitening Composition UM 2-2000-00017 Antimicrobial, Antifungal Soap June 13, 2000 Composition UM 2-2000-00018 Astringent Composition June 13, 2000 UM 2-2000-00019 Hair Conditioner June 13, 2000 UM 2-2000-00020 Hair Conditioning Composition June 13, 2000 UM 2-2000-00210 Health Drink Containing Enzyme Sept. 19, 2000 UM 2-2000-00344 Newly Blended effective Microbes Nov. 6, 2000 UM 2-2000-00394 Moisturizing Lotion Nov. 24, 2000 UM 2-2000-00395 Toothpaste Gel Composition Nov. 24, 2000 UM 2-2000-00403 Roll On Deodorant Composition Nov. 24, 2000 UM 2-2000-00404 Sunscreen Gel Composition Nov. 24, 2000 In reply, please be informed that pursuant to R.A. No. 7459, as implemented by Revenue Regulations No. 19-93 dated July 27, 1993, Veraluz is exempt from the payment of the following taxes for which, otherwise, it shall have been directly liable, viz: (a) Income on the net income derived from the sale of invention products resulting from newly discovered/developed technologies by local researchers or new 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 the 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; and (c) Excise taxes directly payable in connection with the sale of invention products; but still liable to pay the following: 1. 20% final withholding tax on interest from Philippine currency bank deposits, yield or any monetary benefit from deposit substitutes, trust fund and similar arrangements; 2. Capital gains tax on sales of shares of stock prescribed under Section 24(C) of the Tax Code of 1997; 3. Capital gains on sales of real property prescribed under Section 24(D) of the Tax Code of 1997; 4. Income Tax on income not arising from the inventor's productive activity such as interest, royalties, prizes, winnings and dividends; 5. Other percentage taxes under Title V of the Tax Code; 6. Documentary stamp tax on documents, instruments and papers; and SDAcaT 7. 7.5% final tax on interest income from foreign deposits. The exemption shall be during the first ten (10) years from the date of the first sale on a commercial scale, provided that this exemption/privilege pertaining to the invention shall be extended to the legal heir or assignee upon the death of the inventor. Moreover, Veraluz shall register with the proper Revenue District Officer as a withholding agent and as such shall withhold taxes on the wages of its employees and income payments to individuals or corporations subject to the withholding tax under Revenue Regulations No. 2-98. Finally, Veraluz shall prepare and file for each accounting period, in triplicate, on or before the 15 th day of the fourth month following the end of its accounting period, an Annual Information Return with the Revenue District Officer having jurisdiction over its place of business. It is, of course, understood that Veraluz' books of accounts and other pertinent records shall be subject to periodic examination by our revenue enforcement officers for purposes of ascertaining whether it has been complying with the conditions under which it has been granted tax exemption or tax incentives and its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997. (BIR Ruling No. 037-98 dated February 4, 1998) aHIEcS This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group