Under RR 12-2012, the Bureau of Internal Revenue (BIR) imposed a limit on the deductibility of depreciation allowance, maintenance expenses and input VAT on motor vehicles, as follows:
a. Purchase of vehicle must be substantiated with official receipts and other records indicating the price, motor vehicle identification number, chassis number, etc.
b. Taxpayer has to prove the direct connection of the motor vehicle to the business.
c. Only one vehicle for land transport is allowed for the use of an official or employee with value not exceeding P2.4 million.
d. No depreciation shall be allowed for yachts, helicopters, airplanes, and land vehicles over P2.4 million unless the vehicle is used in the company's transport operations or lease of transport equipment.
BIR clarified that the above limitations shall apply to land vehicles purchased upon the effectivity of RR 12-2012 on October 17, 2012.
The non-deductible expenses shall also cover all related expenses and input tax including but not limited to repairs and maintenance, oil and lubricants, gasoline, spare parts, tires and accessories, premiums paid for insurance, and registration fees. In case the non-depreciable vehicles will be sold at a loss, any loss shall likewise not be allowed as a deduction from gross income.
Please see attached copy of RMC 02-2013.
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