BIR Ruling [DA-082-02]

April 30, 2002 BIR RULING [DA-082-02] R.A. 7459 058-2001 Department of Science and Technology Bicutan, Taguig Metro Manila Attention: Dr. Rogelio A. Panlasigui Undersecretary, DOST and Chairman Screening Committee for R.A. 7459 Gentlemen : This refers to your letter dated June 6, 2001 requesting on behalf of Ms. Catherine V. Delantar, Vice-President, Nature's Legacy Eximport , for tax exemption pursuant to the provisions of Republic Act No. 7459, otherwise known as "Inventors and Inventions Incentives Act of the Philippines." It is represented that Nature's Legacy Eximport was incorporated on August 10, 1998 under SEC Registration No. C199800706 located in Barangay Cogon, Compostela, Cebu; that it has been extensively researching its manufacturing process and mixture since 1993 and has manufactured its unique products in 1997 under a single proprietorship, with commercial operations starting in 1999; that Nature's Legacy Eximport manufactures basically all kinds of products that are needed for interior and exterior use, house decoration and restoration; that the company uses 90% local/domestic content (locally manufactured products, supplies and raw materials) and 10% imported contents (mostly small device like water pumps for fountains, reinforcement materials like fiber mat and other components necessary to or that form part of making the product); and that a Certification was issued by the Filipino Inventor's Society dated March 29, 2001, to the effect that Nature's Legacy Eximport is a bonafide inventor and is a member of the Filipino Inventor's Society with following inventions/innovations and letters patent, to wit: PATENT NO. TITLE DATE GRANTED UM-1998-00163 Anamite Stonecast October 21, 1999 UM-1998-00164 Marite Stonecast October 21, 1999 UM-1998-00165 Polystonecast October 21, 1999 UM-1998-0066 Dolorite Stonecast October 21, 1999 In reply, please be informed that pursuant to R.A. No. 7459, as implemented by Revenue Regulations No. 19-93, which reads as follows "Sec. 6. Tax Exemption . To promote, encourage, develop and accelerate commercialization of technologies developed by local researches or adopted locally from foreign sources including inventions, any income derived from these technologies shall be exempt from all kinds of taxes during the first ten (10) years from the date of first sale, subject to the rules and regulations of the Department of Finance: Provided ; That this exemption privilege pertaining to invention shall be extended to the legal heir or assignee upon the death of the inventor. "The technologies, their manufacture or sale shall also be exempt from payment of license, permit fees, customs duties and charges on importation." any income derived from commercialization of technologies and inventions are exempt from all kinds of taxes during the first ten years from the date of first sale, subject to the provisions of said Revenue Regulations No. 19-93. Such being the case, Nature's Legacy Eximport as the patentee of the Utility Model of Anamite Stonecast, Marite Stonecast, Polystonecast and Dolorite Stonecast, is exempt from the payment of the following taxes for which, otherwise, it shall have been directly liable, viz : (a) Income tax 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 1999; 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 7. 7.5% final tax on interest income from foreign currency deposits. The exemption shall be during the first ten (10) years from the date of the first sale on a commercial scale, which shall be reckoned from June 25, 1999, which is the date of registration from the BIR. Further, this exemption/privilege pertaining to the invention shall be extended to the legal heir or assignee upon the death of the inventor. CTcSAE Moreover, Nature's Legacy Eximport shall register with the proper Revenue District Officer as a withholding agent and as such it 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, Nature's Legacy Eximport shall prepare and file for each accounting period, in triplicate, on or before the 15th 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 Nature's Legacy Eximport 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. 058-2001 dated April 2, 2001 ) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. HcaDTE Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group