BIR Ruling [DA-108-97]

March 19, 1997 BIR RULING [DA-108-97] Filchar Manufacturing Corporation 36 Banaag Street Bo. Pineda, Pasig City Attention: Mr . Romulo R . Mesias Gentlemen : This refers to your request for a Certificate of Tax Exemption under the provisions of R.A. No. 7459, otherwise known as the "Inventors and Invention Incentives Act of the Philippines". LLjur Documents submitted show that you are a member of the Filipino Inventors Society, Inc.; and that your approved patent (invention) is An Apparatus for producing Activated Carbon From Carbonaceous Material (Pyrolizer) with Patent No. 24826 issued on October 30, 1990. In reply, please be informed that pursuant to R.A. No. 7459, as implemented by Revenue Regulations No. 19-93 dated July 27, 1993 you are exempt from the payment of the following taxes for which otherwise, you shall have been already 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 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 said invention products, provided, however, that an inventor shall not be exempt from taxes for which it is not directly liable, e.g. VAT on his purchases of raw materials, supplies and equipments/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 21(d) of the Tax Code, as amended; 3. Capital gains tax on sales of real property prescribed under Section 21(e) of the Tax Code, as amended; 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; and 6. Documentary stamps tax on documents, instruments and papers. 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 shall be extended to the legal heir or assignee upon the death of the inventor. Moreover you shall register with the proper Revenue District Officer as a withholding agent and as such shall withhold taxes (1) on the wages of your employee; (2) income payment to individuals or corporations subject to the expanded withholding tax provided for in Section 50 (b) of the Tax Code, as amended; and (3) on government money payments pursuant to R.A. No. 1051 as implemented by Revenue Regulations No. 4-88, as amended by Revenue Regulations No. 10-93. Finally, you shall prepare and file in triplicate on or before April 15, of each year for the preceding calendar year, or if you have designated a fiscal year on or before the 15th day of the fourth month following the close of such fiscal year, an Annual Information Return (BIR Form 1702 A-2) with the Revenue District Officer). cdti It is of course understood that your books of accounts and other pertinent records shall be subject to periodic examination by our revenue enforcement officers for purposes of ascertaining whether you have been complying with the conditions under which you have been granted tax exemption or tax incentives and your tax liability, if any, pursuant to Section 235 of the Tax Code as amended by PD 1959. (BIR Ruling No. 053-95 dated March 8, 1995) Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Asst. (Legal Service)