VAT Imposed on the Services of the Patent & Trademark Agency

February 1, 1988 BIR RULING NO. 016-88 102 (a) 103 (r) 000-00 016-88 S i r : This refers to your letters dated November 2 and December 3, 1987, requesting a ruling as to whether or not the gross receipts derived by Patent and Trademark agents are subject to 10% Value-Added Tax (VAT). It is represented that Patent & Trademark agents here in the Philippines are duly registered and authorized by the Bureau of Patents, Trademarks and Technology Transfer to represent clients from abroad who desire that intellectual property, i.e., trademarks and patents, be registered with the Bureau to protect their rights from being used, pirated or gain unlawful possession of the same; that as such patent and trademark agency, it receives instructions from the foreign clients to register the trademarks and patents in the Philippines; that thereafter, the Patent & Trademark agency bills its foreign clients for expenses and services rendered in dollars with the instructions to remit their checks to the Patent & Trademark agency and/or directly to the bank either by telegraphic transfer or bank drafts; that the bank of the Patent & Trademark agency is allowed by the Central Bank to maintain a foreign currency account pursuant to Republic Act No. 6426; that the inwardly remitted dollars are kept or maintained in a foreign currency deposit unit savings account subject to the Rules and Regulations of the Central Bank; and that if the need for pesos arise, the Patent & Trademark agency will have to sell its dollars to the Central Bank or to any of its duly authorized foreign exchange dealer. In reply, please be informed that on the basis of your representation, the services of the Patent & Trademark agency which are paid for in acceptable foreign currency inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the Central Bank of the Philippines shall be subject to the value-added tax at 0% pursuant to Section 102(a)(2) of the Tax Code as amended by Executive Order No. 273 which took effect January 1, 1988. aisadc On the question of whether the Patent & Trademark agency adverted to and which is allegedly an unregistered non-professional partnership rendering services for a fee may be considered as a corporation for income tax purposes, please be informed in the affirmative. In other words, it is subject to 35% tax on all taxable income received during the year from all sources whether within or without the Philippines pursuant to Section 24(a) of the Tax Code. However, a general professional partnership for the practice of law is exempt from the value-added tax. (Section 103(r), Tax Code, as amended by Executive order No. 273) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner