REPUBLIC OF THE PHILIPPINES Ministry of Finance

Manila April 10, 1980 MINISTRY ORDER NO.

X880

TO

: The Philippine Inventors Commission, All Inventors and Others Concerned:

SUBJECT

: Regulations Implementing Presidential Decree No. 1423, which amended the provisions of Republic'Act No. 3850, otherwise known as the "Philippine Inventors Incentives Act."

Section 1. Pursuant to the provisions of Section 6 of Presidential Decree No. 1423, the following rules and regulations governing the grant of tax exemptions to inventors are hereby promulgated. Section 2. Definition of Terms.-For Purposes of these regulations, the following definition of terms are hereby adapted: "Invention" shall mean any new and useful machine manufac(a) tured product or substance, process or any improvement thereof that satisfies the requirement of novelty, utility and operativeness. As hereinafter used, the word invention shall be construed to include utility models and industrial designs: (b) "Innovation (Utility Model) shall mean any new model of implement or tools of any industrial product or part of the same, which does not possess the quality of invention, but which is of practical utility by reason of its form, configuration, construction or composition. "Industrial Design" shall mean any new original and ornamen(c) tal design for an article of manufacture. (d) "First Sale" shall mean the original sale, barter or exchange by or for the inventor for nominal or valuable consideration intended to transfer ownership of or title to the invention, utility model or industrial design, Provided, That such first sale is effected after the effectivity of this Ministry Order, and Provided, Further, That in the case of inventions granted Letters Patent and registered with the Philippine Inventors Commission after the promulgation of this Order, such first sale shall be construed to mean the actual sale, barter or exchange of the invention made after the grant of the Letters Patent as duly recorded in the books of account of the inventor. Section 3, Persons entitled to tax exemption.- The following persons may avail. of the tax exemption under P.D. No. 1423, viz: (a) Individual. Any Filipino citizen who has an invention duly patented by the Philippine Patent Office. (b) Partnership. In the case of a partnership, the inventor or inventors must be a partner or partners to the partnership and that he or they must own the majority interest in the partnership capital, provided, however, that at least 60% of the capital of the partnership shall belong to Filipino citizens. 0 0.

(c)

Corporation. In the case of corporation, the inventor must be one of the original incorporators, who must own at least 51% of the paid-up capital, provided, however, that at least 60% of the paid-up capital of the corporation belongs to Filipino citizens. The manufacture of the invention shall be carried out by the individual, partnership or corporation as a small/medium scale industry with a paid-up capital of not more than P4,000,000. Section 4. Procedure in the procurement of Certificate of Exemption.. The inventor/inventors shall first file his/their application under oath for tax exemption with the Philippine Inventors Commission in such form as said office may prescribe. There shall be attached to the application the following documents: (a) Authenticated copy of the Letters Patent issued by the Fhilippines Patent Office covering the invention sought to be registered: (b) Authenticated copy of the Certificate of Registration with the Bureau of Domestic Trade in the Case of Individuals; and in the case of partnership or corporation, copies of the articles of partnership/incorporation and certificate of registration with the Securities and Exchange Commission; and (c) The financial statement of the applicant corresponding to the year immediately preceding. The application together with its enclosures shall be processed by the Philippine Inventors Commission. If after evaluation and verification, the applicant satisfactorily complies with all the requirements of the law and these regulations, said Commission shall issue the corresponding Certificate of Tax Exemption. Section 5. Coverage and term of the Tax Exemption.- The manufacture of local inventions, shall be exempted from taxes, license fees and permit fees, except customs duties and charges on imports, during the first five years from the date of first sale. Section 6. Registry of Tax Exemption Certificates.- The Philippine Inventors Commission shall keep a register of all Certificate of Tax Exemption issued which shall contain the name, taxpayer's account number, address of the inventor/inventors in whose favor the certificate and such other information which the aforesaid office may deem appropriate. Said office shall furnish the Ministry of Finance a quarterly summary report of all exemptions granted during the quater. Such summary report shall contain the information indicated in the registry of Tax Exemption Certificates. Section' 7. Keeping of separate books.- The inventor/inventors shall keep and maintain separate books of accounts for each registered invention. Such books of accounts shall be used exclusively to record all the sales and transactions of the inventor/inventors registered invention, which books must have to be registered with the Bureau of Internal Revenue before actual use thereof. Section 8. Grounds for revocation or withdrawal of tax exemption.The tax exemption granted under P.D. No. 1423 and these regulations shall be revoked or withdrawn on the following grounds: (a) Failure to keep separate books of accounts for each registered invention.

(b)

When the capitalization of the grantee exceeds P4,000,000.

(c) When the manufacture of the invention, is carried out by a person other than the inventor/inventors himself or themselves. (d) In the case of a parthership or corporation, if at any time during the period of exemption, the majority interest no longer belongs to the inventor or inventors. (e) If at any time during the period of exemption, the inventor or inventors sell, assign, transfer or convey his or their rights to the patent either wholly or partially. (f) When the inventor dies during the period of exemption. However, in the case of letters Patent issued in the name of two or more inventors, the death of any one of them will not terminate the exemption, provided that the death of any one of the inventors will not diminish the equity requirements. In the case of a pertnership, the death of the inventor-partner terminates the exemption. (g) In the case of a corporation, the death of the inventorincorporator terminates the exemption if; a) b) c)

He has no immediate heiis; He has no will assigning his right specified to immediate heirs; When the immediate heirs do not control 51% of the corporation.

Section 9. Repealing clause.- Any provision of existing rules and regulations inconsistent herewith is hereby repealsed or amended accordingly. Section 10. Effectivity.- This Order shall take effect immediate-

ly.

CESAR VIRATA

Minister of Finance