Request for Tax Incentives under R.A. 7459

September 6, 1994 BIR RULING NO. 137-94 21 000-00 137-94 Department of Science & Technology (DOST) Bicutan, Taguig Metro Manila Attention: Hon . Ricardo T . Gloria Secretary Gentlemen : This refers to your letter dated May 25, 1994 indorsing the request of Mr. Leoncio Luna, proprietor of Hilma Industries for tax incentives under R.A. 7459 otherwise known as the "Inventors and Invention Incentives Act of the Philippines". cdti It is represented that Mr. Leoncio P. Luna is an inventor, and duly certified by the Filipino Inventors Society, Inc. (FIS); that he alleged that he has an invention, entitled "An Improved Ball & Socket Joint" under Patent No. UM 6277 issued by the Bureau of Patents, Trademarks & Technology Transfer dated January 29, 1987; that the said invention was already screened and evaluated by FIS and Technology Livelihood Resource Center (TLRC) who had already extended financial assistance to the project in the amount of P400,000.00, in the form of a loan; that the said invention, is now already on commercial scale as evidenced by its contracts with the MERALCO. In reply, please be informed that Section 3(c) of Revenue Regulations No. 19-93 implementing R.A. 7459, provides that: "Sec. 3. Tax Incentives and Tax Exemptions . xxx xxx xxx C. The inventor shall be exempt from the following taxes for which otherwise he shall have been directly liable: (a) Income tax on the net income derived from the sale of invention products resulting from newly discovered developed technologies by local researches 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 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; (c) Excise taxes directly payable in connection with the sale of invention products; the aforestated tax exemptions are the only tax privileges accorded by the said law to the inventors. Such being the case, Mr. Leoncio Luna, an inventor, is entitled to the aforequoted tax exemptions. However, Filipino inventors enjoying the said tax exemption privileges shall be subject to the 20% final withholding tax on interest from Philippine Currency bank deposits, yield or any monetary benefit from deposit substitutes, trust fund and similar arrangements, and from capital gains tax on sales of real property and shares of stock prescribed under Section 21 (e) and (d) of the Tax Code, as amended. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue