BIR Ruling [DA-511-98]

November 19, 1998 BIR RULING [DA-511-98] Ms. Yolanda P. Laudico 101 Bormaheco Condominium Metropolitan Avenue cor. Zapote Street Makati City M a d a m : This refers to your request 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 Issue Title of Patent Kind of Patent Number Date Matting Design D5336 06-19-92 D5348 06-19-97 D5352 (renewal) that you are an accredited member of the Filipino Inventors' Society (FIS); that the Inter-Agency Screening Committee has evaluated and confirmed 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/machineries, 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; LLcd 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 evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas based on the remaining maturity thereafter before the 5th year under Sec. 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 of 1997; 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 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 the Revenue regulations No. 4-88, as amended by the Revenue Regulations No. 10-93. 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 issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be declared null and void. Very truly yours, BEETHOVEN L. RUALO Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)