Amazing Touch

April 21, 2008 BIR RULING [DA-261-08] RA 7459; DA-556-04 Amazing Touch #22 Commercial Teachers Bliss Condominium II Balon Bato, Quezon City Attention: Dr. Rolando C. dela Cruz World Class Inventor Gentlemen : This refers to your letter dated January 30, 2008 requesting for a Certificate of Tax Exemption under the provisions of Republic Act (R.A.) No. 7459, otherwise known as the "Inventors and Invention Incentives Act of the Philippines". It appears that you are an inventor and registered patent holder of a herbal treatment for removing Basal Cell Carcinoma (DeBCC) or Skin Cancer, with Patent No. 1-2004-000328. The amazing anti-cancer cream, the DeBCC, developed and studied by innovative PGH doctors with your help, won the top prize during the 93rd Annual Clinical Congress of the American College of Surgeons (ACS) held in New Orleans, Louisiana, USA last October 7 to 11, 2007. The Philippine entry presenting the DeBCC, an innovative topical cream to treat the most common type of skin cancer was initially chosen as one of 11 "Poster of Exceptional Merit" and voted as the "Best Scientific Exhibit" for 2007. Last October 18 to 22, 2006, with the blessings of Secretary Estrellita F. Alabastro of the Department of Science and Technology (DOST), you joined the British Invention/Innovation Show, which is considered one of the largest and most prestigious invention show in the United Kingdom. Luckily, out of the 37 countries, you reaped three (3) major awards, namely the: 1) Double Gold Award (for Demole and Dewart Cream); 2) Diamond Award for DeBCC cream, Treatment for Basal Cell Carcinoma or Skin Cancer; and 3) Obelisk Award Over-all winner in the whole competition event. These awards are thought to bring pride and honor to Philippines. 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: . . ." In effect, 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; 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 RA 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 RA 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 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service