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