BIR Ruling [DA-216-06]

April 6, 2006 BIR RULING [DA-216-06] R.A. 7459; DA-104-2001 Anos Research Manufacturing c/o Teofista A. Anos 6 Anak Bayan St., Paltok SFDM Quezon City M a d a m : This refers to your letter dated December 18, 2002 requesting for a ruling that as a registered inventor of a patented design or product 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 inventor of "A Mini Fire Truck" with Patent No. UM Reg. 2-1997-15278 dated November 15, 1999. As certified by the Filipino Inventors Society, Inc., you are a bona fide member of good standing of the said organization. In addition, the Screening Committee has evaluated and recommended you to be eligible to the tax incentives under the aforesaid law. In reply, please be informed that pursuant to R.A. 7459, as implemented by Revenue Regulations 19-93 dated July 27, 1993, you are exempt from the payment of 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. However, you are 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; 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. 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 Office 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, is implemented by Revenue Regulations No. 2-98, as amended. Finally, you shall file in triplicate on or before April 15 of each year for the preceding calendar year an Annual Information Return with the Revenue District Office 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. DA-104-2001 dated June 1, 2001 citing BIR Ruling No. 53-95 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 disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. CIcEHS Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue