BIR Ruling [UN-352-95]

October 2, 1995 BIR RULING [UN-352-95] Innovatronix Incorporated No. 19 Rose St., Lourdes Subdivision Brgy. Mambungan, Sumulong Hi-way Antipolo, Rizal Attention: Mr . Ramon I . Castillo President Gentlemen : This refers to your letter dated July 14, 1995, in effect requesting for a certificate of tax exemption under R.A. 7459, otherwise known as the "Inventors and Invention Incentives Act of the Philippines." cdta It is represented that you are a Filipino inventor and 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 "Electronic Chess Clock" under Patent No. 7712 issued by the Bureau of Patents, Trademarks and Technology Transfer dated November 25, 1993; 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; 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 exemptions for a period of ten (10) years from the date of first sale on a commercial scale pursuant to Section 6 of R.A. No. 7459 as implemented by Section 3(C) of Revenue Regulations No. 19-93. This exemption privilege pertaining to the invention shall be extended to the legal heirs or assigns upon the death of the inventor, pursuant to Section 3(B) of the same Regulations. 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 fund and similar arrangements, and to the capital gains tax on sales of shares of stock and real property prescribed under Section 21(e) and (d) 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) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant (Legal Service)