Clarifying vehicle depreciation

THE Bureau of Internal Revenue issued Revenue Memorandum Circular No. 2-2013 clarifying certain provisions of Revenue Regulations No. 12-2012 on the deductibility of depreciation expenses as it relates to purchase of vehicles and other expenses related thereto, and the input taxes allowed therefor.

Through the above regulation, it was clarified that Revenue Regulations No. 12-2012 which imposed the threshold of P2,400,000 for land vehicles only applies prospectively from the date of its publication on Oct. 17, 2012.

In cases where vehicles which are not allowed as depreciation expenses or the non-depreciable expenses will be sold at a loss, any loss that will be incurred as a result of a sale of the non-depreciable vehicle shall likewise not be allowed as deduction from the taxpayer’s gross income.

For income tax purposes, all expenses related to the non-depreciable vehicles such as but not limited to repairs and maintenance, oil and lubricants, gasoline, spare parts, tires and accessories, premium paid for insurance covering said vehicles and registration fees shall not be allowed as a deduction in its entirety. For value added tax purposes, all input taxes corresponding to the disallowed expenses mentioned above for income tax purposes are likewise not allowed.

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