Royalties and similar fees can be charged to operations provided payments
for said fees are covered by a technology transfer agreement (TTA) which
conforms with the mandatory and restrictive provisions of the Intellectual
Property Code (IPC). Compliance of the TTA with the IPC requirements
will not require the registration of the TTA with the Documentation,
Information and Technology Transfer Bureau (DITTB) of the Intellectual
Property Office (IPO).
The non-conformity of the TTA with the IPC shall generally render the
TTA unenforceable. However, in certain exceptional and meritorious cases
provided under the IPC, non-compliance with the IPC is allowed subject to
prior approval of the TTA by the IPO.
The IPC provides certain restrictions in the terms and conditions of the TTA
particularly those that will adversely affect free competition and trade. It
also prescribes certain mandatory provisions that should be included in the
TTA.
Royalties and similar fees are generally subject to 30% gross income
tax and 12% value added tax when payable to a non-resident foreign
corporation. However, the tax rates for the royalties payable to residents of
foreign countries with which the Philippines has a tax treaty vary according
to the terms of the respective treaties.
Reimbursements of actual cost incurred abroad for operations such as
maintaining offices, advertising, commission, etc. are allowed provided
they are duly supported by documents and that these costs are incurred in
connection with the regular course of trade or business of the local paying
company
Technology transfer arrangements refer to contracts or agreements
involving the following: transfer of systematic knowledge for the
manufacture of a product or the application of a process; rendering of a
service, including management contracts; and the transfer, assignment, or
licensing of all forms of intellectual property rights, including licensing of
computer software, except computer software developed for mass market.
Within ten days from the filing of the request for certification of
compliance, the DITTB conducts a summary evaluation of the TTA. If the
TTA conforms with the Prohibited Clauses and Mandatory Provisions of the IPC, the DITTB issues a Certificate of Compliance. Otherwise, the DITTB notifies the parties of any violation and requires them to comply with the IPC if they wish to obtain a Certificate of Compliance.
With the liberalization of foreign exchange rules, remittance of royalties,
fees, or similar payments to a foreign company, net of the applicable taxes,
may be made through AABs without need of BSP approval.
The following documents may be required by the AABs to prove the
legitimacy of the transaction: (a) copy of contract/agreement; (b)
statement/computation of the royalty/copyright/patent/licensing fee; and
(c) proof of payment of withholding tax or tax exemption or entitlement to
preferential tax treatment, as the case may be.