Vazquez Building Systems Corporations

March 7, 2008 BIR RULING [DA-142-08] R.A. 7459; RR 19-93; DA-191-2000 Vazquez Building Systems Corporations 1269 EDSA, Quezon City Attention: Mr. Edgardo G. Vasquez President and Chief Executive Officer Gentlemen : This refers to your letter dated May 3, 2007, on behalf of Vazbuilt Technology Corporation with address at 159 Doa Lucing Avenue, Villa Leoncia Subdivision, Brgy. Calibutbut, Bacolor, Pampanga and Vazquez Lakeshore, Inc. with address at Km. 71, North Luzon Expressway, Mexico, Pampanga, requesting in effect, for tax exemption under Republic Act (R.A.) No. 7459, otherwise known as the Investors and Inventions Incentives Act of the Philippines. Records show that Inventor Edgardo G. Vasquez is the registered patent holder of the following products: Patent Registration No. Title Date Issued/1st Ext./2nd Ext. Inv. No. 28144 Modular Housing Unit 03-24-94 ID 3-1998-00497 Expanded housing Unit 03-24-00/03-24-05 ID-3-1996-11645 A Fence 11-29-99/11-29-99 ID-3-1996-11648 A Fence 11-22-99/11-22-04 ID-3-1996-11650 A Fence 11-12-99/11-12-04 Design No. 7014 A Housing Unit 12-01-95/12-01-00/ 12-01-05 Design No. 5489 Precast Concrete Column 09-28-92/09-28-02 Design No. 5478 Roofing Tiles 09-28-92/09-28-02 Design No. 5744 Precast Concrete Column 08-18-93/08-18-98 08-18-03 Design No. 6243 A Prefabricated Housing Unit 10-03-94/10-03-04 UM No. 8027 Reinforced Prefabricated Concrete 10-10-95/10-10-00/ Post Column and the Like 10-10-05 UM No. 8026 Reinforced Prefabricated Concrete 10-10-95/10-10-00/ Tie Beams and the Like 10-10-05 that the aforesaid inventor is an accredited member of the Filipino Inventors Society (FIS); that in BIR Ruling No. 181-95 dated December 6, 1995, this Office held that he has: EcDSHT ". . . been granted tax incentives and tax exemptions pursuant to Section 3 of Republic Act No. 7 45 9, as implemented by Section 3 (C) of Revenue Regulations No. 1 9-9 3 (UN-041-95 and 042-95, March 31, 1995). In reply, please be informed that the exemption from income tax on the net income . . . from the sale of the foregoing invention products, . . . if any, directly payable in connection with such sale, shall continue to be available to you and the corporations to be established with you as the majority stockholder." In reply, please be informed that R.A. 7459, as implemented by Revenue Regulations No. 19-93 dated July 27, 1993, particularly Section 6 thereof states that: "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 exempted from all kinds of taxes during the first ten (10) years from the date of the first sale, subject to the rules and regulations of the Department of Finance: . . ." (emphasis supplied) Nonetheless, you are still subject to the following taxes: 1. 20% final withholding taxes on interest from currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and 7 1/2% final withholding tax on interest from foreign currency deposit; SACTIH 2. Capital gains tax on sale of shares of stock prescribed under Section 24 (C) of the Tax Code of 1997; 3. Capital gains tax on sale 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. Value-added tax (VAT) on the gross receipts/revenues derived from the sale of the said invention products, and also VAT for which the inventor is not directly liable, e.g., VAT on his purchases of raw materials, supplies and equipment/machinery, which may be shifted to him as part of the cost of goods sold or for services rendered; and 6. Other percentage taxes under Title V of the Tax Code; and 7. Excise taxes directly payable in connection with the sale of invention products; 8. Documentary stamp tax on documents, instruments and papers. The said exemption can be availed of during the first ten (10) years from the date of the first sale on a commercial scale, provided that said exemption privileges pertaining to the invention shall be extended to the legal heir or assignee upon the death of the inventor. It is important to note that the Final Resolution of the Office of the President (OP), in OP Case No. 03-G-422 dated February 2, 2004, affirming the finding of the Department of Finance denying the appeal of an inventor relative to his tax exemption privileges granted by this Office, clarifies that the only tax exemption granted by the first paragraph of Section 6 of R.A. 7459 merely refers to income tax. Moreover, you shall register with the proper Revenue District Officer as a withholding agent and as such shall withhold taxes (1) on the wages/salaries of your employees; (2) on your income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997; 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, and as last amended by Revenue Regulations No. 2-98. DacTEH Finally, you shall prepare and file in triplicate on or before April 15 of each year for the preceding calendar year an Annual Information Return with the Revenue District Officer having jurisdiction over your place of business. It is of course understood, that your books of accounts and other pertinent records shall be subject to periodic examinations 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 of 1997. (BIR Ruling No. 653-95 dated March 8, 1995) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner