When calculating Philippine taxable income, tangible and intangible assets owned by an enterprise are normally depreciated over their normal useful life using the straight-line method. However, alternate reasonable methods may generally be used as long as the aggregate amount of depreciation plus salvage value at the end of the useful life of the asset is equal to its cost. Alternate methods allowed include:

The declining-balance method
The sum-of-the-years-digit method
Any other method which may be prescribed by the Secretary of Finance

Depreciation is mandatory and may not be postponed. Generally, tax depreciation should conform to book depreciation, unless the former includes incentives.

Petroleum and Mining Operations

Special rules are applicable for petroleum and mining operations.

Assets used in petroleum operations may be depreciated over a period of 10 years using the straight-line or declining-balance method, at the option of the service contractor.

Assets used in mining operations with expected life of more than 10 years may be depreciated over any number of years between five years and their expected life.

A cost depletion allowance is also available.

Accelerated Depreciation

Effective 15 July 2022, registered renewable energy developers can claim accelerated depreciation at a rate of up to 2 times the normal depreciation rate under the declining balance method or the sum-of-the years digit method on plant, machinery, and equipment that are used for the exploration, development, and utilization of renewable energy resources, subject to certain conditions (see Sec.10.1.).

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