RR No. 12-2012: Prescribes the rules on the deductibility of depreciation expenses as it relates to purchase of vehicles and other expenses related thereto, and input taxes allowed therefor

Summary

RR No. 12-2012 prescribes the rules on deducting depreciation on purchased vehicles and related expenses, and on the input taxes allowed for them.

Key points

1. Substantiating the purchase. No depreciation deduction is allowed without sufficient evidence, such as official receipts or adequate records. These must show the vehicle’s identification, chassis or other registrable number, its total price, and its direct connection to the taxpayer’s business or profession.
2. One vehicle per official. Only one land transport vehicle is allowed for an official or employee, and its value must not exceed Two Million Four Hundred Thousand Pesos (Php 2,400,000.00).
3. No depreciation items. No depreciation is allowed for yachts, helicopters, airplanes, aircraft, or land vehicles above the threshold. The exception is a taxpayer whose main line of business is transport operations or lease of transportation equipment, with the vehicles used in those operations.
4. Maintenance and input taxes. Maintenance expenses on non-depreciable vehicles are disallowed in full. Input taxes on buying such vehicles and on their maintenance expenses are also disallowed.

Who is affected

• Taxpayers claiming depreciation on vehicles
• Taxpayers whose main business is transport operations or lease of transportation equipment (exception)

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