BIR Ruling [UN-448-95]

December 22, 1995 BIR RULING [UN-448-95] Mr. Benjamin S. Santos President & General Manager Bensan Industries, Inc. P.O. Box No. 1170 Manila S i r : This refers to your letter dated November 27, 1995 requesting for exemption under R. A. 7459, otherwise known as the "Inventors and Invention Incentives Act of the Philippines". It is represented that you are a member of the Filipino Inventors Society, Inc.; that on July 12, 1994, you were issued Patent No. 28342 for An Improved Process for Re-refining Used Oil by the Bureau of Patents, Trademarks and Technology Transfers; and that Bensan technology was adjudged as the "Best Invention for Year 1994" by the World Intellectual Property Organization (WIPO). In reply, please be informed that 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 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 aforestated tax exemptions. cdta 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. (BIR Ruling No. 137-94 dated September 6, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)