Exemption of Makers of Local Inventions, Utility Models or Industrial Designs from Taxes, License Fees and Permit Fees

August 26, 1985 BIR RULING NO. 145-85 24 000-00 145-85 Gentlemen : This refers to your letters dated November 17, 1982 and July 8, 1983 requesting exemption from taxes, license fees and permit fees as well as a refund of taxes, withheld or paid by you pursuant to Presidential Decree No. 1423 amending Republic Act No. 3850 otherwise known as the "Philippine Inventor's Incentives Act". Investigation of this case disclosed that Modular Construction, Inc. (MCI) is a domestic corporation duly registered and existing under Philippine Laws with Mr. Edilberto F. Florentino, a Filipino citizen as its president; that Mr. Edilberto Florentino is an inventor and holder/awardee of Letters of Patent issued by the Philippine Patents Office consisting of the following (a) UM 3989: Improved roofing tile (Patented April 23, 1980); (b) Invention 13456; Method of Erecting Minifile Reinforced Concrete Bulbed Column Floating (Patented April 23, 1980); (c) UM 3990: Hollow core (Pre-cast Concrete Thin Shell Panel (Patented, April 23, 1980); (d) Invention 13449, Method of Forming Concrete Thin Slab on Plunger Pile Foundation (Patented April 23, 1980); and (e) UM 4774; Improved Lightweight Unitized Concrete Masonry Wall (Patented, Nov. 13, 1981); that as of December 31, 1982, MCI had a paid up and issued capital of P90,000.00 of which at least 60% is owned by Mr. Edilberto F. Florentino and 30% is owned by his wife Milagros C. Florentino; that MCI started its business operations on January 1, 1981; and that during the taxable year 1982, MCI kept separate accounting records on the production and sale of products where it made use of the patents. In reply, please be informed that under Section 12 of Presidential Decree No. 1423 amending R.A. 3850 which provides viz.: "SEC. 12. To promote and encourage the manufacture of local inventions, utility models or industrial designs, their manufacture shall be exempted from taxes, license fees and permit fees, except customs duties and charges on imports, during the first five years from the date of the first sale, subject to the rules and regulations to be promulgated by the Department of Finance: Provided, that their manufacture is carried out by the inventors himself/themselves as a small/medium scale industry with capitalization not exceeding four million pesos; Provided further , that in case of a partnership or a corporation, the majority interest belongs to the patentee/s himself/themselves, Provided still further , That the manufacturer shall keep separate books of accounts of the manufacture and sale of said inventions: and Provided finally , that the manufacturer is a Filipino citizen or an enterprise at least sixty percent of the capital of which is owned by such citizens." MCI is exempt from taxes, license fees and permit fees (except customs duties and charges on imports) on its manufacture and sale of articles covered by the Patent for a period of five years starting from January, 1982. The exemption, therefore, does not include taxes incurred resulting from the use of the patented products in the construction of buildings or edifices either by MCI itself or by other persons. The aforesaid exemption from taxes by MCI has been withdrawn by P.D. No. 1955. However, pursuant to FIRB Resolution No. 3-84 dated December 21, 1984, effective October 15, 1984, the exemption of the manufacture of local inventions, utility models, or industrial designs from the payment of all kinds of taxes, license fees and permit fees, except customs duties and charges on imports during the first five (5) years from the date of first sale, under Republic Act No. 3850, as amended by P.D. No. 1423, has been restored. cdtech As regards your claim for refund of taxes withheld and paid, please be informed that appropriate action is now being taken thereon. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner