Tuesday, July 10, 2007 Tax notes: Sale of trademarks by foreign firms
SALE of trademarks by a non-resident foreign corporation to a local company is considered a sale of properties.
However, such sale is not made in the course of trade or business of the seller nor considered necessary or incidental in carrying out its business of licensing its trademarks in the Philippines.
Thus, applying the rule of regularity, such sale of trademarks is not subject to value-added tax (VAT). (Bureau of Internal Revenue Ruling DA-162-2007, March 20, 2007)
Trademarks are treated as intangible assets that may be subject to depreciation if it can be shown that the period over which they can be used in trade or business is definite.
Hence, the local company buyer may amortize the cost of the trademarks acquired over a period estimated based on the average remaining lives of the trademarks pursuant to their registration and the period required to build similar brands in the market. (Source: Punongbayan & Araullo)
