Do you charge depreciation and vehicle-related expenses to your business expenses? Recently, the BIR issued stricter rules stating that not all company vehicles, whether by land, sea or air, can be depreciated and deducted from gross income.
In claiming depreciation expense, the taxpayer must substantiate the purchase of the vehicle with sufficient evidence such as official receipts or other adequate records containing registrable identification number of the vehicle, its total price subject to depreciation and must prove the direct connection or relation of the vehicle to the development, management, operation or conduct of the business. Further, only one vehicle for land transport, which value should not exceed Php 2.4M, is allowed for use of an official or employee.
Yachts, helicopters, airplanes or aircrafts are not allowed to be depreciated unless the main line of business is transport or lease of the vehicles and they are used in the operations. Moreover, the maintenance expenses related to non-depreciable vehicles are disallowed as well as the input vat thereon.