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 (Published in Manila Bulletin on October 17, 2012)

COMMUNICATHONEAU OF INTERNAL REVENUE 1N REPUBIIC OF THE PHIIIPPINES DEPArtMENt OF FiNANCe RECORDS MGT DIVISION BURJAU OF INTERNAL REVBNUD RECEIVED oC7 13 2012+ 358 p U

VET October 12, 2012

DATE By }{5E}E REVENUE REGULATIONS NO. 12-0012

BUREAUOF INTERHALREVE$UE

SUBJECT Deductibitity of Depreciation Expenses as it Retates to Purchase of

Vehicies and Other Expenses Related Thereto, and Input Taxes Allowed Therefor.

TO All Internal Revenue Officials and Others Concerned

SECTION 1. Scope. -- Pursuant to the provisions of Section 244, in relation to Section 245 of the National Internal Revenue Code of 1997, these Regulations are hereby promulgated to implement Sections 34 (F) and 110 of the 1997 National Internal Revenue Code ("Tax Code"), specifically to define depreciation expenses relating to taxpayer's purchase of Vehicles of all types (defined herein as passenger vehicles of all type, whether by land, water, or air) providing for limits on the deductibility thereof and all expenses retated thereto, and the disallowance of input taxes for disallowed expenses.

SECTION Z. General Principles. - Under Chapter VII, Section 34 {F) of the Tax Code, in computing taxable income, a reasonable aflowance for the exhaustion, wear and tear of property used in business is allowed to be deducted from gross income. Generally, it cannot be presumed that the purchase of a Vehicle is a purchase of a property used in business. In order for the deduction for depreciation for said purchase, and all other experses and input taxes incurred on said Vehicle may be allowed, the rules as prescribed under these Regulations must be complied with.

SECTION 3. Rules on Deductibility of Depreciation on Vehicles, Other Expenses Incurred

the taxpayer, or in claiming other expenses and input taxes on account of said Vehicte: determining whether depreciation expense can be claimed or not on account of Vehicies capitalized by Thereon, and Input Taxes on Disallowed Expenses. - The following guidelines shall be observed in

A. No deduction from gross income for depreciation shall be allowed unless the taxpayer

substantiates the purchase with sufficient evidence, such as official receipts ar other adequate records which contain the following, among others:

I Specific Motor Vehicle Identification Number, Chassis Number, or other

registrable identification numbers of the Vehicle; The total price of the specific Vehicle subject to depreciation; and I The direct connection or relation of the Vehicle to the develapment

management, operation, and/or conduct of the trade or business or profession of the taxpayer;

B Only one Vehicle for land transport is allowed for the use of an official or emplovee, the

value of which should not exceed Two Million Four Hundred Thousand Pesos (Php 2,400,000.00;

C. No depreciation shall be allowed for yachts, helicopters, airplanes and/or aircrafts, and lanc vehicles which exceed the above threshold amount, uniess the taxpayer's main line of business is transport operations or lease of transportation eguipment and the vehicles

purchased are used in said operations;

D. Ait maintenance expenses on account of non-depreciabie Vehicles for taxation purposes are disallowed in its entirety;

E. The input taxes on the purchase of non-depreciabie Vehicles and all input taxes on maintenance expenses incurred thereon are likewise disallowed for taxation purposes.

SECTION 4 Repealing Clause.- All Rules and Regulations or parts thereof inconsistent with the provisions af these Regulations are hereby repealed accordingly.

SECTION 5. Effectivity.- The provisions of these Reguiations shaif take effect immediately.

CEST Ar Y.POriSMA Secretary of Finance

006018 Recommending Approval:

KIM S/JACINfO-HENARES Comyfnissiofer of Internal Revenue RECORDS MGT. LIVISION BUREAU OF NTERNAL REVENUE CC} } z 2012 3:580M

01}130 RECEIVET

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