Author MRTC

REVENUE REGULATIONS (RR) NO. 027-2025

This Regulation is hereby promulgated to amend Section 8 of RR No. 25-2003 modifying the allowable depreciation rate for vehicle transfersfrom tax-exempt persons/entities to non-tax-exempt buyers, whether locally purchased or imported to ensure equitable tax computation and alignment with market-based valuation. Accordingly, in cases where a tax-exempt person/entity acquired an automobile without payment of the tax by reason of his/their exemption, the purchase thereof by a non-exempt person/entity shall be subjected to the ad valorem tax based on, whichever is higher of:

  • the actual consideration; or
  • the depreciated value of the automobile at the time of sale, transfer, or exchange which

Depreciation rate shall be at sixteen percent (16%) per year, but in no case shall the total amount of depreciation be more thaneighty percent (80%)of the original cost or value.

However, in case where the automobile was acquired prior to and sold after the effectivity of the amended Act, the computation of the ad valorem tax stated in this Act shall be applicable.

Moreover, when it is determined that such acquisition was primarily intended to avoid the payment of excise tax, the tax shall be assessed based on the original purchase price or value of importation at the time of acquisition, without any allowance for depreciation.

Indicators of Tax Avoidance (Unless Proven Otherwise)

  1. The vehicle is sold or transferred soon after acquisition (e.g., within a year) without a valid reason.
  2. The entity frequently buys tax-exempt vehicles and disposes of them shortly after, suggesting a business practice rather than legitimate institutional use.
  3. The vehicle is transferred to an officer, employee, relative, or affiliated entity without fair market terms.
  4. Records show the vehicle was barely used for official operations before being disposed of.
  5. There is evidence of plans to sell or transfer the vehicle before or shortly after acquisition.
  6. The entity’s nature or size does not justify acquiring a luxury or high-value vehicle under tax exemption.
  7. The vehicle was never properly registered to the tax-exempt entity, or it was mainly used by persons not connected to the entity.
  8. Any other factors showing the vehicle was acquired primarily to avoid excise tax rather than for legitimate institutional use.

These Regulations shall take effect fifteen (15) days following publication in the Official Gazette or the BIR’s official website, whichever comes first.