You are on page 1of 4


Fringe benefit means any good, service, or other benefit furnished or granted by an employer in cas or
in kind, in addition to basic salaries, to an individual employee (except rank and file employee).
 Housing
 Expense account
 Vehicle of any kind
 Household personnel
 Interest on loan at less than market rate to the extent of the difference between the market rate
and the actual rate granted
 Membership fees, dues and other expenses in social and athletic clubs or other similar organizations
 Expense for foreign travel
 Holiday and vacation expenses
 Educational assistance to the employee or his dependents
 Life or health insurance and other non-life insurance premiums or similar amounts in excess of what
the law allows
Imposition of Fringe Benefit Tax
Fringe benefit tax is imposed on the on the grossed up monetary value of the fringe benefit. It is subject
to a final withholding tax. It is imposed on the employee but the employer is required by law to pay the
tax on behalf the employee.
Exemptions to Fringe Benefit Tax
1. Fringe benefits which are authorized and exempted from income tax under the Code or under any
specific law;
2. Contributions of the employer for the benefit of the employee to retirement, insurance and
hospitalization benefit plans;
3. Benefits given to the rank-and-file, whether granted on under a collective bargaining agreement or
4. De minimis benefits;
5. If the grant of fringe benefits to the employee is required by the nature of or necessary to the trade,
business or profession of the employer; or
6. If the grant of the fringe benefit is for the convenience or advantage of the employer (“convenience
of the employer” rule)
Convenience-of-the-Employer Rule
Allowances furnished by the employer to employees as a condition for employment and for the
convenience of the employer are not taxable to the employee.
Fringe Benefits to Rank and File Employees
Rank and file employees are employees who hold neither managerial nor supervisory position. Fringe
benefits form part of their gross compensation income Fringe benefits given to rank and file employees
are exempt from fringe benefit tax but are taxable as ordinary income.
De Minimis Benefits
The following shall be considered as “de minimis benefits” not subject to income tax as well as
withholding tax on compensation income of both managerial, supervisory and rank-and-file employees:
1. Monetized unused vacation leave credits of private employees not exceeding 10 days during the
2. Monetized value of vacation and sick leave credits paid to government officials and employees;
3. Monetized cash allowance to dependents of employees not exceeding P750 per employee per
semester or P125 per month;
4. Rice subsidy of P1,500 or one sack of 50 kilogram rice per month amounting to not more than
5. Uniform and clothing allowance not exceeding P5,000 per annum;
6. Actual medical assistance not exceeding P10,000 per annum;
7. Laundry allowance not exceeding P300 per month;
8. Employees’ achievement awards with an annual monetary value not exceeding P10,000
received by the employee under an establish written plan which does not discriminate in favor
of highly paid employees;
9. Gifts during Christmas and major anniversary celebrations not exceeding P5,000 per employee
per annum;
10. Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the
basic minimum wage on a per region basis
All other benefits given by employers which are not included in the above enumeration shall not be
considered as “de minimis benefits,” and hence, shall be subject to income tax as well as withholding tax
on compensation.
Employer Gives Benefit Beyond the Ceiling
The amount of de minimis benefits conforming to the ceilings herein prescribed shall not be considered
in determining the P30,000 of other benefits. However, if the employer pays more than the ceiling, the
excess shall be taxable to the employee receiving the benefits only if such excess is beyond P30,000.
Such excess, therefore, shall be considered as ordinary income of the employee and shall from part of
his taxable income.
Tax Rate and Tax Base
The monetary value of the fringe benefit is divided by 68% to arrive at the grossed-up monetary value.
The grossed-up monetary value is then multiplied by the tax rate of 32% to get the fringe benefit tax.
Housing Privilege
As a general rule, housing benefits given to employees are subject to tax. The following, however, are
not considered as taxable fringe benefits:
1. Housing privilege of military officials of the Armed Forces of the Philippines;
2. A housing unit which is situated inside or within the maximum of 50 meters from the perimeter of
the business premises or factory;
3. Temporary housing for an employee who stays in a housing unit for 3 months or less
Guidelines for Valuation and Determination of the Monetary Value
Case 1 – Leases (as lessee) residential property for the use of the employee
- Monthly rental paid by the employer
Case 2 – Owns residential property which was assigned to an officer for his use as residence
5% of FMV of land and improvements -
Case 3 – Purchases residential property on installment basis and allows the employee to use the same
as his residence
5% of acquisition cost excluding interest -
Case 4 – Purchases a residential property and transfers ownership thereo in the name of the employee
- Acquisition cost or FMV, whichever is higher
Case 5 – Owns residential property which was assigned to an officer for his use as residence
- FMV of CIR and FMV of Assessor, whichever is
higher, minus the cost to the employee