Tax Exemptions of Manufacturer of Local Inventions (Char-Stove and Kettle)

December 26, 1985 BIR RULING NO. 220-85 321 000-00 220-85 Gentlemen : This refers to your letter dated June 3, 1985, stating that you manufacture local inventions known as Improved Char-Stove with Patent No. IM-5343 and Improved Kettle with Patent No. UM-5595; and that said inventions are covered by Certificates of Tax Exemption issued on April 29, 1985, pursuant to Section 12 of P.D. No. 1423 amending R.A. 3850. In connection therewith, you request a ruling on the following: (1) Do license fees include municipal license? (2) Do you have to keep separate sales books, cash disbursement books, ledgers and journals for each registered invention? (3) Do you have to issue separate sales invoices for each registered invention? In reply thereto, please be informed that Section 12 of Presidential Decree No. 1423 amending R.A. 3850 provides, viz: "Sec. 12. To promote and encourage the manufacture of local inventions, utility model 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 first sale . . . Provided still further , that the manufacturer shall keep separate books of accounts of the manufacture and sale of said inventions." . . . Under the above-quoted provision, you are exempt from taxes, license fees and permit fees (except customs duties and charges on imports) on your manufacture and sale of articles covered by the aforementioned patent for the first five years starting from the date of first sale. As such, you are required to keep separate books of accounts (journals, ledgers or their equivalents) of the manufacture and sale of inventions. This means that the books of accounts shall pertain exclusively to the manufacture and sale of inventions covered by Certificates of Tax Exemption. It is not necessary that a separate book be kept for each invention. The same ruling applies with respect to the issuance of sales invoices covering the sales of inventions. As regards your query on license fees, the same should be directed to the Ministry of Finance, Local Tax Advisory Board. Finally, taxes you have paid on your tax-exempt products can be refunded or credited provided you file with the Commissioner of Internal Revenue a written claim for refund within two years from the payment of said taxes. (Section 295, NIRC as amended). Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner