BIR Ruling No. 486-2021

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quezon City

RA No. 7459: IN.TTT RR No. 19-93 BIR Ruling No. 505-19 .a2: DEC 2 ZUZ!

MR. ROLANDO C. DELA CRUZ

Gentlemen:

patented product, under Republic Act (RA) No. 7459, otherwise known as the "Inventors and Inventions Incentives Act of the Philippines." This refers to your letter request for tax exemption, as registered inventor of a

(FIS) Inc. and registered patent holder of the following product: Records show that you are an accredited member of the Filipino Inventors Society.

Moles and the Likes A Reformulated Fast Acting Herbal Preparations to Remove Warts, Utility Model 2-2012-000147 Patent No. October 31, 2012 Date Issued January 13, 2018 First Sale Date of

has evaluated and recommended that the above-mentioned patented invention is eligible for the tax incentives pursuant to its Resolution No. 2017-011 dated October 26, 2017, as confirmed under Confirmation Certificate No. 2017-008 issued by. TAPI Screening Filipino Inventors Society, Inc. Committee; and that the invention is new and original, that the technology is newly developed by local researches or adopted locally from foreign sources and that the manufacture of the invention product from the technology developed is on commercial scale, as certified by the The Technology Application and Promotion Institute (TAPI) Screening Committee

In reply, please be informed that Section 6 of RA No. 7459 provides:

regulations of the Department of Finance: provided, that this tax develop and accelerate commercialization of technologies developed by local researchers or adapted locally from foreign sources shall be exempted from all kinds of taxes during the first ten (10) years from the date of the first 'sale, subject"to the rules and legal heir or assignee upon the death of the inventor. including inventions, any income derived from these technologies exemption privilege pertaining to invention shall be extended to the "Section 6. Tax exemption. to promote, encourage,

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exempt from payment of license, permit fees, customs duties and churges on imports. ' The technologies, their manufacture or sale, shall also be

any income received by the company, RCC Amazing Touch Int'l Inc., from such production/distribution/marketing is subject to the payment of appropriate taxes. the first ten (10) years from January 13, 2018 which is the date of the first sale on a commercial scale, provided that this exemption/privilege pertaining to the invention shall be however, that the tax exemption under the aforesaid Section is for the inventor alone and not for any other entity that commercially produces and distributes the invented product. Hence. extended to the inventor's legal heir or assignee upon his death. It must be emphasized, Based on the above law, the said exemption can be availed of by the inventors during

Section 2 which states that: exemption therein only applies to the inventor, this should be read in conjunction with Moreover, while Section 6 of RA No. 7459 does not specifically mention that the

contributes to national development and progress. "*(Emphasis supplied) hereby declared to be the national policy to give priority to invention and its invention, particularly when the invention is beneficial to the people and utilization on the country 's productive systems and national life; and to this end provide incentives to inventors and protect their exclusive right to their "SECTION 2. Declaration of National Policy and Program. -- It is

should be construed to refer only to you and should not include RCC Amazing Touch Int'1 7459 that only the original inventor is entitled to the tax incentives.2 Consistent with the intent of its framers to provide incentives to the original inventors, Section 6 of RA No. 7459 Inc. Likewise, congressional records disclose that it is in the legislative intent of RA No.

absurd result wherein it would allow anyone to claim the tax exemption privilege by alleging that it acts as the producer. manufacturer, and/or marketer of the technology or product. of RA No. 7459 is to exempt the income derived by the inventor from the technologies and invention. To say that the tax exemption is attached to the technology or invention itself regardless of whoever produces, manufactures, and/or markets the same, would create an In light of these circumstances, it must be read that the purposes of Section 6

contributes to national development and progress. Limiting the tax exemption privilege only Incentives Act of the Philippines is to'provide incentives to inventors and protect their to the original inventor does not contradict the furtherance of this policy. exclusive right to their invention, particularly when it is beneficial to the people and To be clear, the government's purpose in enacting the Inventors and Inventions

Congressional records wherein it is discussed that when Representative Mario S. Ty was asked during deliberation with respect to the tax incentives provision of House Bill No. 24801, which later became RA No. 7459, he was clear and categorical in saying that the tax incentives pertain exclusively to the original inventor. 3 DOF Opinion No. 18-2019 dated December 18, 2019. 1 DOF Opinion No. 18-2019 dated December 18, 2019. 2 Splash Corporation v. Commissioner of internal Revenue, C.T.A. Case No. 8483, April 6, 2017 citing the 4 fbid.

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Department of Finance denying the appeal of an inventor relative to his tax exemption privileges granted by this office, clarifies that the tax exemption granted by the first paragraph of Section 6 of RA No. 7459 refers to income tax only. (OP), in OP Case No. 03-G-422 dated February 2, 2004, affirming the finding of the It is important to note also that the Final Resolution of the Office of the President

In effect, the aforementioned inventors are still subject to the following taxes:

I 20% final withholding taxes on interest from currency bank deposit and yield or

similar arrangements and 15%3 final withholding tax on interest from foreign currency deposit; any other monetary benefit from deposit substitutes and from trust funds and

2 Capital gains tax on sale of shares of stock prescribed under Section 24 (C) of the National Internal Revenue Code of 1997 (Tax Code), as amended; 3 Capital gains tax on sale of real property prescribed under Section 24 (D) of the Tax Code, as amended;

4 Income tax on revenues not arising from the inventor's registered invention such as interest, royalties, prizes, winnings and dividends; 5 liable," e.g."VAf" on..his "purchases "of "raw" materials, suppliesteand Value-added tax (VAT) on the gross receipts/revenues derived from the sale of the said invention products, and also VAT"for which the inventor is not directiy equipment/machinery, which may be shifted to him as part of the cost of goods sold or for services rendered; and

1 Other percentage taxes under Title V of the Tax Code, as amended:

I Excise taxes directly payable in connection with the sale of invention products:

and

8. Documentary stamp tax on documents, instruments and papers.

corporations subject to the expanded withholding tax provided for in Section 57 (B) of the of the Bureau of Internal Revenue as a withholding agent and as such shall withhold taxes Tax Code, as amended. (1) on wages/salaries of their employees; and (2) on their income payments to individuals or Furthermore, as inventor, you shall register with the proper Revenue District Office

the preceding calendar year, or if you have designated a fiscal year, an Annual Information Return with the Revenue District Officer having jurisdiction over your place of business. Finally, you shall prepare and file in triplicate on or before April 15 of each year for

5 Increased from 7-1/2% to 15% as amended by TRAIN Law.

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of ascertaining whether you have been complying with the conditions under which you have shall be subject to periodic examination by our Revenue Enforcement Officers for purposes been granted tax exemption or tax incentives and your tax liability, if any, pursuant to Section 235 of the Tax Code, as amended. It is, of course, understood that your books of accounts and other pertinent records

ruling shall be considered null and void. However, if upon investigation, it will be ascertained that the facts are different, then this This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours.

K-1 Commissioner of Internal Revenue CAESAR R. DULAY 047976