BIR Ruling [DA-349-00]

September 25, 2000 BIR RULING [DA-349-00] Mr. Arsenio V. Navarro, Jr. TAPI Building, DOST Compound Gen. Santos Avenue Bicutan, Taguig Metro Manila Gentlemen : This refers to your letter dated August 12, 2000 requesting for a ruling as to whether or not you are entitled to the tax incentives under R.A. No. 7459, otherwise known as the Inventors and Inventions Incentives Act of the Philippines, as a registered inventor of patented design or product. Records show that you are the registered patent holder of the following product/design: Patent No. Title Design No. 6259 A School Chair Design No. 6260 A Frame Structure for School Chair Design No. 974 Stool and Similar Article Design No. 6975 A Frame Structure for Stools and the Like Design No. 6958 School Desk Frame Design No. 6957 School Chair Frame Invention No. 12392 Convertible Chalice-Monstrance for Holy Mass Invention No. 12393 Burial Casket that you are an accredited member of the Filipino Inventor's Society (FIS); that the Inter-Agency Screening Committee has evaluation and confirmed that you are eligible to the tax incentives under the aforesaid law. In reply thereto, please be informed that pursuant to RA 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/machineries, which may be shifted to him as part of cost of goods sold or for services rendered; and ECTIHa (c) Excise taxes directly payable in connection with the sale of invention products; but still liable to pay the following: 1. 20% final withholding tax on interest income from any currency bank deposit, yield, or any other monetary benefit from deposit substitutes, trust funds and similar arrangements, royalties, prizes and other winnings; 2. 7-% final withholding tax on interest income from a depository bank under the expanded foreign currency deposit system; 3. Final withholding tax on the interest income from the pre-terminated long term deposit or investment certificate in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidences by certificates in such form prescribed by the Bangko Sentral ng Pilipinas based on the remaining maturity thereafter before the 5th year under Section 24(B)(1) of the Tax Code of 1997; 4. Final withholding tax on cash and/or property dividend actually or constructively received from a domestic corporation, etc. pursuant to Section 24(B)(2) of the Tax Code of 1997. 5. Capital gains tax on sales of shares of stock not traded in the stock exchange prescribed under Section 24(C) of the Tax Code of 1997; 6. Capital gains tax on sales of real property classified as capital assets prescribed under Section 24(D) of the Tax Code, supra; 7. Other percentage taxes under Title V of the Tax Code; and 8. Documentary stamp tax on documents, instruments and papers. The exemption shall be during the first ten (10) years from the date of the first sale of your invention on a commercial scale, provided that this exemption/privilege 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 of your employees; (2) income payment to individuals or corporations subject to the withholding tax provided for in Section 57 of the Tax Code of 1997; and (3) on government money payment pursuant to RA No. 1051, as implemented by Revenue Regulations No. 4-88, and as last amended by Revenue Regulations No. 2-98, as amended. CDAHaE 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 examination 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. 101-98 dated June 29, 1998) This ruling is being issued on the basis of foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group