Any income derived from the sale of patented products shall be exempt from the payment of income taxes

for a period of ten

(10) years from the date of the product’s first sale on a commercial scale, subject to the rules and regulations of the
Department of finance.

Section 6 of RA no. 7459 reads:

“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.”
The law is clear that it exempts the income on the inventions from taxes. Absolute Sentencia Expositore Non Indiget, when the
language of the law is clear, no explanation of it is required (Splash Corporation v. CIR, CTA Case No. 8904, June 11,
2018).
** ** **

Reinstatement is defined in insurance as a restoration of the insured’s rights under a policy which has lapsed or been
cancelled. A policy holder or one who has allowed his policy to lapse does not mean new insurance or taking out a new policy,
but does mean that the insured has been restored to all the benefits accruing to him under the policy contract, the original
policy. The reinstated policy does not renew the non-life insurance or take out a new policy. As such, a reinstated policy is not
subject anew to DST (Oriental Assurance Corporation v. CIR, CTA Case No. 9169, June 11, 2018).
** ** **

Royalties are dutiable only when they relate to the goods being valued. This is clear in Section 201 of the TCCP and in the
Customs Administrative Order No. 4-2004 (Colgate-Palmolive Philippines, Inc. v. Commissioner of Customs, CTA E.B.
No. 1471, June 04, 2018).

** ** **

Although an ecozone is undeniably a sovereign territory of the Philippines, treating the zone as a special customs territory is
necessary to give a meaningful effect to the objectives expressed in the special law creating a particular economic zone. In
effect, what is created is a fiction of a foreign territory. The entity that manages this fiction of foreign territory is the Philippine
Economic Zone Authority (PEZA).

Sales to PEZA-registered entities are deemed zero-rated. Among the measures adopted by the government, to implement the
policy of promoting preferential use of Filipino labor, domestic materials, and locally produced goods, and to help make them
internationally competitive, is the establishment of special economic zones or freeports. In pursuit of these social and economic
objectives, enterprises registered and authorized to conduct business operations in designated economic zones enjoy fiscal
incentives, among which is relief or exemption from payment of national and local taxes, in lieu of which they pay a flat rate on
gross income.

In the context of the fiction of foreign territory and as a result of the destination principle, any sale of goods and services made
by a VAT-registered supplier in the customs territory to any registered enterprise operating in the economic zone, regardless of
the class or type of its PEZA registration, is actually qualified and thus legally entitled to zero percent (0%) VAT (Pilipinas
Total Gas, Inc. v. CIR, CTA Case No. 7863, June 19, 2018).