BIR Ruling [UN-160-95]

April 12, 1995 BIR RULING [UN-160-95] Dept. of Science and Technology Bicutan, Taguig, Metro Manila Attention: Mr . William G . Padolina Acting Secretary Gentlemen : This refers to your letter dated November 2, 1994 indorsing the request of Mr. Benjamin M. Abat, proprietor of Bezma Traders Enterprise for tax incentives under R.A. 7459 otherwise known as the "Inventors and Invention Incentives Act of the Philippines". It is represented that Mr. Benjamin M. Abat is an inventor, and duly certified by the Filipino Inventors Society, Inc. (FIS); that he alleged that he has an invention, entitled "Improvement relating to television projection system" under Patent No. 22098 issued by the Bureau of Patents, Trademarks and Technology Transfer dated May 20, 1988; that the said invention was already screened and evaluated by FIS; that the said invention is now already on commercial scale. In reply, please be informed that pursuant to Section 3(c) of Revenue Regulations No. 19-93, implementing R.A. 7459, stating: "SEC. 3. Tax Incentives and Tax Exemption : xxx xxx xxx C. The inventor shall be exempt from the following taxes for which otherwise 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 privilege of Mr. Rizal A. Obligar shall include exemptions from income tax, value added tax and excise tax. However, Filipino inventors enjoying the said tax exemption privileges shall be subject the 20% final withholding tax on interest from Philippine Currency bank deposits, yield or any other monetary benefit from deposit substitutes, trust fund and similar arrangements, and from capital gains tax on sales or real property and shares of stock prescribed under Section 21(e) and (d) of the Tax Code, as amended. (BIR Ruling No. 137-94 dated September 6, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA. L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)