BIR Ruling [UN-241-95]

June 30, 1995 BIR RULING [UN-241-95] Hon. William G. Padolina Acting Secretary Department of Science & Technology Bicutan, Taguig, Metro Manila Attention: Mr . William G . Padolina Acting Secretary S i r : This refers to your letter dated January 6, 1995 endorsing among others, the request of Mr. Rizal A. Obligar, proprietor of G. O. Engineering Enterprises to avail of the tax incentives under R.A. 7459 otherwise known as the "Investors and Invention Incentives Act of the Philippines". It is represented that Mr. Rizal A. Obligar is a Filipino inventor, duly certified by the Filipino Inventors Society, Inc. (FIS) as its bona fide member, and entitled to all the tax incentives/benefits under R.A. No. 7459 for his invention which is already on commercial scale, consisting of "An Improved Battery Clamp" under Patent No. UM7096 issued by the Bureau of Patents, Trademarks and Technology Transfer dated October 30, 1990; and that the said invention was already screened and evaluated by FIS. 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; Mr. Rizal A. Obligar shall be exempt from income tax, value added tax and excise tax on his aforesaid invention. However, 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 other monetary benefit from deposit substitutes, trust funds and similar arrangements, and to the capital gains tax on sales of shares of stock and real property prescribed under Section 21(d) and (e) of the Tax Code, as amended. (BIR Ruling No. UN344-94, dated December 7, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)