BIR Ruling [DA-151-97]

April 8, 1997 BIR RULING [DA-151-97] Department of Science & Technology Bicutan, Taguig Metro Manila Attention: Mr . William G . Padolina Secretary Gentlemen : This refers to your letter dated November 2, 1994 indorsing among others, the request of Mr. Ermildo Diamante representing Diatron, Inc. to avail of the tax incentives under R.A. 7459 otherwise known as the "Investors and Invention Incentives Act of the Philippines." casia It is represented that Mr. Ermildo Diamante is a Filipino inventor duly certified by the Filipino Inventors Society, Inc. (FIS) as its bona fide member; as such, he is entitled to all the incentives/benefits under R.A. 7459 for his invention which is already on commercial scale, entitled "EGI Lamp System" under Patent No. M 7437 issued by the Bureau of Patents, Trademarks and Technology Transfer dated November 5, 1992; and that the said invention has already been screened and evaluated by FIS. In reply, please be informed that Section 3(c) of Revenue Regulations No. 19-93 implementing R.A. No. 7459, provides that: "Sec. 3. Tax Incentives and tax Exemptions . 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 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 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 aforestated tax exemptions are the only tax privileges accorded by the said law to the inventors. Such being the case as an inventor, Mr. Ermildo Diamante is entitled to the aforequoted tax exemptions for a period of ten (10) years from the date of first sale on a commercial scale as defined in Section (2) (a) of Revenue Regulations No. 19-93, implementing Republic Act No. 7459. However, Filipino investors 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 monetary benefit from deposit substitutes, trust fund and similar arrangements, and to the 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. UN344-94 dated December 12, 1994, citing BIR Ruling No. 21/000-090/137-94) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)