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RMC No. 70-2010: Circularizes the revocation of BIR Ruling Nos. DA-413-04 and DA-436-04 and clarifies the basis in computing depreciation of property, plant and equipment

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Summary

RMC No. 70-2010 circularizes the revocation of BIR Ruling Nos. DA-413-04 (July 30, 2004) and DA-436-04 (August 12, 2004). It also clarifies the basis for computing depreciation of property, plant and equipment.

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Key points

  1. Acquisition cost as the basis. Citing Basilan Estates, Inc. vs. CIR (GR No. L-224992, 5 September 1967), the circular states that depreciation of an asset rests on its acquisition cost, not its reappraised value.
  2. Earlier BIR position. RAMO No. 1-00 (17 March 2000) already provides that no depreciation is allowed on the appraisal increase of fixed assets. Any foreseeable salvage value is deducted from the asset’s cost to arrive at the depreciation basis.
  3. Reason for the position. Depreciation as a mere recovery of cost has not changed from the old Tax Code to the present, so there is no compelling reason to depart from the Supreme Court’s principles.

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.

Copies of BIR issuances are hosted here for reference. For the official version, check bir.gov.ph. Summaries by Tax Resources PH are not a substitute for the full text or professional advice.