Entitlement of Registered Inventor to Tax Incentives under RA 7459

October 7, 1999 BIR RULING NO. 155-99 R.A. 7459-653-95-155-99 Mr. Gonzalo O. Catan, Jr. MAPECON, Philippines, Inc. 2459 Arellano Avenue Malate, Manila S i r : This refers to the letter dated February 20, 1996 of the Secretary of the Department of Science and Technology (DOST) to this Office, requesting for a ruling that as a registered inventor of patented design or products described below, you are entitled to the tax incentives under R.A. No. 7459, otherwise known as the Inventors and Inventions Incentives Act of the Philippines. The said letter is accompanied by two letters addressed to the Secretary of the Department of Science and Technology; a letter from the Secretary of the Department of Justice bearing Opinion No. 66, Series of 1996 and a letter from Senator Heherson Alvarez dated November 12, 1997. cdll Records show that you are the registered patent holder of the following product/design: Title of Invention Kind of Patent Patent Number Issue Date Household Invention INV 16556 16 November 1983 Insecticide and Method of Use Therefor that you are a bona-fide inventor that won First Prize for Most Commercial Invention Category in the National Inventors' Week; that you were chosen as the Most Outstanding inventor in the 1994 Science and Technology Week; and that the Interagency Screening Committee has evaluated and recommended 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 implemented or tools and other related gadgets of invention, utility model and industrial design patents; LibLex (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; but you are still liable to pay the following: 1. 20% final withholding tax on interest from currency bank deposit and yield or any other monetary benefit from deposit substitute and from trust funds and similar arrangements and 7 percent on interest from foreign currency deposit; 2. Capital gains tax on sales of shares of stock prescribed under Section 24(C) of the Tax Code of 1997; 3. Capital gains tax on sales of real property prescribed under Section 24(D) of the Tax Code of 1997; 4. Income Tax on income not arising from the inventor's productive activity such as interest, royalties, prizes, winnings and dividends; 5. Other percentage taxes under Title V of the Tax Code; and 6. Documentary stamp tax on documents, instruments and papers. This exemption shall be during the first ten (10) years from the date of the first sale 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. cdll 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; and (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. cdlex Finally, you shall prepare and file in triplicate on or before April 15 of each year for the preceding calendar year, or if you have designated a fiscal 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. 653-95 dated March 8, 1995) This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue