BIR Ruling No. 215-12

March 28, 2012 BIR RULING NO. 215-12 Republic Act No. 7459; Revenue Regulations No. 19-93 Innovatronix, Inc. No. 10 Rose St. Lourdes Subdivision Mambugan, Antipolo City Attention: Mr. Ramon I. Castillo Inventor Gentlemen : This refers to the letter sent on your behalf by the Technology Application and Promotion Institute (TAPI) dated 20 August 2010, transmitting the application for tax exemption of inventor Mr. Ramon I. Castillo under the provisions of Republic Act No. 7459 (RA 7459), otherwise known as the "Inventors and Invention Incentives Act of the Philippines". It is represented that inventor Mr. Ramon I. Castillo, representing Innovatronix, Inc. with business address at No. 10 Rose St. Lourdes Subdivision, Mambugan, Antipolo City, is a certified member of the Filipino Inventors Society, with the following inventions/innovations and letters patent including date/s of first sale of such inventions on a commercial scale, to wit: Patent Title Date Issued Date of First Sale UM-2-2008- Battery Switch-Over 6 October 2008 January 18, 2010 000347 Circuit UM-2-2008- Digital Picture 6 October 2008 May 21, 2009 000348 Processing System UM-2-2008- Pure Sine Wave 6 October 2008 January 5, 2009 000349 Inverter UM-2-2008- Electric Assist 6 October 2008 February 11, 2010 000350 Bicycle It is further represented that the Filipino Inventors Society has certified the abovementioned inventions/innovations are manufactured on a commercial scale; and that the Screening Committee created under RA 7459 has endorsed the same on 15 July 2010. In reply, please be informed that pursuant to RA 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: (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; and (c) Excise taxes directly payable in connection with the sale of invention products. On the other hand, you are still liable to pay the following: 1. 20% final withholding tax on interest from Philippine currency bank deposits, yield or any monetary benefit from deposit substitutes, trust fund and similar arrangements; 2. Capital gains tax on sales of shares of stock prescribed under Section 21(d) of the Tax Code, as amended; DEICTS 3. Capital gains tax on sales of real property prescribed under Section 21(e) of the Tax Code, as amended; 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. The 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. 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 the Tax Code of 1997, as amended, and as implemented by Revenue Regulations No. 2-98, as amended. 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 on or before the 15th day of the fourth month following the close of such fiscal year, an Annual Information Return with the Revenue District Officer. 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. IECAaD This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue