BIR Ruling [UN-349-95]

October 2, 1995 BIR RULING [UN-349-95] Dimatulac Magsipoc & Co., CPA 207 Continental Court Condominium 47 Annapolis St., Greenhills San Juan, Metro Manila Attention: Mr . Alberto T . Dimatulac Managing Partner Gentlemen : This refers to your undated letter, in effect requesting for a confirmation of your opinion that as a registered inventor of patented designs or products described below, Mr. Juanito A. Simon, with business name Simon Petrochemical Industries, located at Suite 207, Continental Court Condominium, 47 Annapolis St., Greenhills, San Juan, Metro Manila, is entitled to the tax incentives under R.A. No. 7459, otherwise known as the inventors and Inventions Incentives Act of the Philippines. cdi Records show that Mr. Juanito A. Simon is the registered patent holder of the following product/design: Title of Kind of Issue Patent Patent Number Date Composition to Invention 22556 10/17/83 Reduce Friction in Machines, Engines and Equipment that Mr. Simon is an accredited member of the Filipino Inventors' Society (FIS); that the Interagency Screening Committee has evaluated and confirmed that he is eligible to the tax incentives under the aforesaid law. In reply, please be informed that Section 3(c) of Revenue Regulations No. 19-93 implementing R.A. No. 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 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, as an inventor, he is entitled to the aforequoted tax exemptions for a period of ten (10) years from the date of first sale on a commercial scale as defined in Section (2) (a) of Revenue Regulations No. 19-93, implementing Republic Act No. 7459. 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 to the 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 344-94 dated December 12, 1994, citing BIR Ruling No. 21/000-090/137-94) aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant Legal Service