BIR Ruling [UN-272-95]

July 25, 1995 BIR RULING [UN-272-95] Econolux Enterprises 7344 de la Cruz Compound Sucat Road, Paraaque Metro Manila Attention: Mr . Rodolfo B . Biescas, Sr . Inventor/General Manager Gentlemen : This refers to your letter dated February 21, 1995, requesting for tax incentives under R.A. No. 7459 otherwise known as the "Inventors and Invention Incentives Act of the Philippines." It appears that you are an inventor duly certified by the Filipino Inventors Society, Inc. (FIS); that you have an invention entitled "Automatic Switching Device for Flat Iron" under Patent No. INV 25841 issued by the Bureau of Patents, Trademarks & Technology Transfer dated November 5, 1991; that the said invention was already screened and evaluated by FIS; and that the same is now already on commercial scale as evidenced by xerox copies of Purchase Orders issued by your customers. In reply, please be informed the Section 3(c) of Revenue Regulations No. 19-93 implementing R.A. 7459, provides that: "Sec. 3 Tax Incentives and Tax Exemptions . 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 inventions, 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, as an inventor, you are entitled to the aforequoted tax exemption. 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 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. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)