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Question regarding Tax Exemption under Inventors act REPUBLIC ACT NO. 7459

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makerdude


Arresto Menor
I have a question regarding this part...

RA 7459
Article III

Sec. 6. Tax Exemption. — To promote, encourage, develop and accelerate commercialization of technologies developed by local researchers or adapted locally from foreign sources including inventions, any income derived from these technologies 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 regulations of the Department of Finance: Provided, that this tax exemption privilege pertaining to invention shall be extended to the legal heir or assignee upon the death of the inventor.
The technologies, their manufacture or sale, shall also be exempt from payment of license, permit fees, customs duties and charges on imports.


So the goal of the government is for people  to  promote, encourage, develop and accelerate commercialization of technologies and the gov't will do this by giving tax incentives to people who does these things.


The way I understand it is that you can get tax exemption 2 ways.

a. develop locally some kind of invention

OR

b.  adapt locally a foreign invention


I'm more interested in the 2nd part which is adapt locally a foreign invention.

The way I understand it is that I don't need to invent something in order to avail of these tax incentives.  I just have to adapt locally a foreign invention.


So the phrase "adapt locally a foreign invention" is the tricky part.

Case I
If some company abroad developed a rice harvesting machine,  and I just adapt it locally meaning make the machine suitable to philippine conditions,  do I qualify for the tax exemption?

Case II (Simple invention)
An LED flashlight I believe is a foreign invention.  So if I make an LED flashlight, I cannot claim that it is my invention, however, can it be considered a local adaptation of a foreign invention thereby allowing me to claim this tax exemption?

Case III (electronic modules such as power supply)
I assume power supplys are foreign invention. These are the ones that you plug in to the wall outlet and outputs a lower power suitable to your device (ie laptop power supply, phone charger..etc)  

There are several ways/approach to doing power supplys and therefore there are several schematics on how to create a power supply.   Every ECE graduate can perhaps design and create a power supply.

I'm not an ECE graduate but I can design power supplys.  The schematic design could originally have been created by a foreign person and therefore I cannot claim that it is an invention.  However,  if I create a power supply module (meaning the board without enclosure),  does that make it a local adaptation of a  foreign invention and therefore I can avail of this tax exemption?


I'm also reading the Implementation Rules for this and I can't seem to find anything about local adaptation of a foreign invention. (I was about to put a link to the IRR but the forum does not allow me to do it)


Under Section 4.1 of the Implementation rules,  it only talks about local inventions.  It DOES NOT say anything about adapting locally any foreign invention which was clearly stated in RA7459.

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Lunkan


Reclusion Perpetua
I don't know answer to your question, just adding some things to think of:

1. Make difference between INVENTION and CONSTRUCTION.
Case 1 is probably only a construction.
Invention is when it's a so much new idea so it could be patented.

2. If you take a patented INVENTION and just make new design, then you can need to pay a licence fee to the inventor or risk to be sued at a lot of money...

Buying LED lamps from abroad and put them in your design I suppouse is NOT qualifying for extempt.


...
Here is an OTHER perhaps useable idea for you Smile
If you aim at starting a Micro business, you can try to get it approved as a BMBE business. There are some demands. Not a part of a biger organisation as for instance a franchise. And I believe max 9 employees. Then the OWNER get unlimited free INCOME tax. The other taxes and fees are normal.

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makerdude


Arresto Menor
Yes for Case1 I would assume it is an invention of foreign origin, and then a construction locally but of course with some local adaptation like perhaps changes to power sources/batteries or some materials/parts that is locally available.

I'm not really after whether it's an invention or not locally but rather the tax advantages of "adapting a foreign invention".

As for the license fee, there are other foreign inventions that are open source. Example is 3d printers. Definitely 3d printers are not a local invention but knowing how it works, if I "adapt locally" this foreign invention, develop, perhaps improve this invention to make it suitable to local conditions (ie available parts, power,climate), then I don't have problems with licenses since it is an open source hardware.

The question still would be, based on the existing law, does that qualify me for the tax exemption.

I hope other people reading can shed light on this because if it is, then people like me who like to make stuff and build on top of other existing open source projects can benefit.

I definitely think it should qualify since the spirit of the law is to promote, encourage, develop and accelerate commercialization of technologies

Lunkan wrote:I don't know answer to your question, just adding some things to think of:

1. Make difference between INVENTION and CONSTRUCTION.
Case 1 is probably only a construction.
Invention is when it's a so much new idea so it could be patented.

2. If you take a patented INVENTION and just make new design, then you can need to pay a licence fee to the inventor or risk to be sued at a lot of money...

Buying LED lamps from abroad and put them in your design I suppouse is NOT qualifying for extempt.


...
Here is an OTHER perhaps useable idea for you   Smile
If you aim at starting a Micro business, you can try to get it approved as a BMBE business. There are some demands. Not a part of a biger organisation as for instance a franchise. And I believe max 9 employees.   Then the OWNER get unlimited free INCOME tax. The other taxes and fees are normal.

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Lunkan


Reclusion Perpetua
"I hope other people reading can shed light on this because if it is, then people like me who like to make stuff and build on top of other existing open source projects can benefit."
I would like to know that too. I like tax extemptions/deductions Smile

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