BIR Ruling [UN-155-95]

April 11, 1995 BIR RULING [UN-155-95] Plaza Business Venture Corp. Ground Floor Katipunan Bldg. 95 E. Rodriguez Avenue Quezon City Attention: Mr . Felicito P . Plaza President/Gen . Manager Gentlemen : This refers to your letter dated February 9, 1995 requesting for a Certificate of Tax Exemption under RA 7459 otherwise known as the Inventors and Invention Incentives Act of the Philippines. cdtech It is represented that Mr. Felicito P. Plaza is the proprietor of Plaza Business Venture Corp., which is a member of the Safety Organization of the Philippines, Inc.; that he is an inventor and duly certified by the Filipino Inventors Society, Inc. (FIS); that he alleged that he has an invention, entitled "Safety Valve for LPG Burner" under Patent No. UM-7124 issued by the Bureau of Patents, Trademarks & Technology Transfer dated December 26. 1990; that the said invention was already screened and evaluated by the FIS. In reply, please be informed that Section 3(c) of Revenue Regulations No. 19-93 implementing RA 7459, provides that: "SEC. 3. Tax Incentives and Tax Exemptions . xxx xxx xxx C. The investor shall be exempt from the following taxes for which 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. Felicito P. Plaza, an inventor, is entitled to the aforequoted tax exemptions. However, an inventor shall be constituted as a withholding agent and shall be required to withhold and remit to the BIR withholding tax on his payments as an employer of compensation income to his employees or on his payments to persons subject to expanded withholding tax. Finally, 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. (BIR Ruling No. UN-142-95 dated April 6, 1995). aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)