BIR Ruling [DA-191-00]

March 30, 2000 BIR RULING [DA-191-00] Mr. Jesus J.B. Ledesma J. Ledesma Enterprises A. Bonifacio Street Paraaque, Metro Manila S i r : This refers to your letter dated June 27, 1996 to the Filipino Inventors Society, Inc. which was endorsed to this Office on February 20, 1998 by the Department of Science and Technology requesting for a ruling that as a registered inventor of patented design or products described below, you are entitled to the tax incentives under R.A. No. 7459, otherwise known as the Inventors and Inventions Incentives Act of the Philippines. Records show that you are the registered patent holder of the following products/designs: Title of Invention Kind of Patent Patent Number Issue Date Dental Chair Utility Model UM 8160 10 April 1996 Dental Lavatory Utility Model Um 6405 08 December 1994 that you are an accredited member of the Filipino Inventors Society (FIS);that the Inter-agency Screening Committee has evaluated and recommended that you are eligible to the tax incentives under the aforesaid law. 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 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/machinery, 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 you are still subject to the following taxes: 1. 20% final withholding tax on interest from currency bank deposit and yield or any other monetary benefit from deposit substitute and from trust funds and similar arrangements and 7% final withholding tax on interest from foreign currency deposit; 2. Capital gains tax on sales of shares of stock prescribed under Section 24(C ) of the Tax Code of 1997; 3. Capital gains tax 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; and 6. 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. 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. 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 issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)