Depreciation Schedule for Imported Vehicles

Section 608 of the Tariff and Customs Code of the Philippines (TCCP), as amended, provides the legal basis for issuing depreciation guidelines for imported vehicles.
Section 149 of the Tax Code of 1997, as amended by Republic Act No. 9224, is part of the legal basis for applying depreciation in the tax context.
Depreciation guidelines are issued in relation to a DOF Joint Order governing the disposition of tax-exempt vehicles registered or owned by Diplomatic Mission and Consular Offices/Officials enjoying tax and duty free privilege.
The guidelines govern the determination of the rate of depreciation for motor vehicles for guidance and uniform implementation of all concerned.

No-Dollar importations of motor vehicles must follow the depreciation schedule for motor vehicles by model year.
For current year models, the rate of depreciation is No Depreciation.
For one-year old models, the rate of depreciation is 10%.
For two-year old models, the rate of depreciation is 20%.
For three-year old models, the rate of depreciation is 30%.
For four-year old models, the rate of depreciation is 40%.
For five-year old and older models, the rate of depreciation is 50%.
Depreciation value computation must use the straight-line method at an annual rate of 10%, but the rate of depreciation shall not exceed 50%, which is the maximum rate under the schedule.

For tax-exempt vehicles registered in the name of a Diplomatic Mission, a Consular Office, or owned by Diplomatic Officials, and for Consular Offices and their administrative and technical staff members enjoying tax and duty privilege, the depreciation rate applies when the vehicles are disposed or transferred by way of sale or donation to non-privileged persons or entities.
For purposes of computing duties due where Methods 2, 3 and 6 are used to determine the value of the motor vehicle based on the Japanese or Red Book (as the case may be), depreciation must be computed using the straight line method at 10% for every year.
The duties-related depreciation must not exceed 90% in total under these Japanese/Red Book valuation methods.
The depreciation rate is applied to determine the valuation effect for duties under the specified valuation methods.

For purposes of computing ad valorem tax where the value is based on the depreciated value of the automobile at the time of sale or transfer, the depreciation rate is 10% per year.
The total depreciation for ad valorem tax must not be more than fifty percent (50%) of the original cost or value.
The ad valorem tax depreciation limit governs when the vehicle’s value is determined using the depreciated value at the time of sale or transfer.

For trucks and heavy equipment, depreciation must follow the straight-line method at 10% per year.
For trucks and heavy equipment, depreciation must not exceed 90%.

The depreciation guidelines establish the rate of depreciation for motor vehicles using uniform rules for concerned parties.
Straight-line computation must be applied for both the general “No-Dollar importations” rule and the diplomatic/japanese-red-book and heavy equipment rules, consistent with the annual 10% rate where mandated.
The Order provides numerical depreciation schedules and caps to standardize how depreciation is reflected in value determinations affecting duties and tax.

Compliance with the Order’s depreciation schedule is required for the guidance and uniform implementation of all concerned.
A formal filing requirement applies: a copy of the Administrative Order must be filed with the Office of the National Administrative Register, UP Law Center.