If there is a treaty between countries

In general, or in the absence of

stipulation: 35%

Applicability of 15% preferential tax rate for employees

The 15% preferential income tax rate for qualified employees of regional headquarters (RHQs),
regional operating headquarters (ROHQs), offshore banking units (OBUs), and petroleum
contractors and subcontractors is abolished, although preferential tax rates still may apply under
existing international tax treaties.

As from 1 January 2018, all employees of RHQs, ROHQs, OBUs, and petroleum contractors
and subcontractors are subject to progressive income tax rates.

Problem No. 4:

Problem 4:
Olais Corp., a regional operating headquarters of a Multinational Corp. established in the Phils.,
provided its employees cash and non-cash fringe benefits in 2019 as follow:
Total amount of fringe benefits P1,000,000
60% of said amount was given to rank and file employees
40% of said amount was given to corporate officers as follow:
a. to resident citizens 45%
b. to non-resident aliens not engaged in business in the Phils. 35%
c. to special aliens and Filipino employees 20%
Problem 4:
Olais Corp., a regional operating headquarters of a Multinational Corp. established in the Phils.,
provided its employees cash and non-cash fringe benefits in 2019 as follow:
Total amount of fringe benefits P1,000,000
60% of said amount was given to rank and file employees
40% of said amount was given to corporate officers as follow:
a. to resident citizens 45%
b. to non-resident aliens not engaged in business in the Phils. 35%
c. to special aliens and Filipino employees 20%

Corrected Answer:

Fringe benefit   1,000,000.00  

rank and file (1M*60%)

Employees 600,000.00  
Supervisors (1M*40%) 400,000.00
FRINGE BENEFIT COMPUTATION
Grossed Up
Fringe
  Monetary   Formula FBT FBT rate
benefit
Value
RC (45%* 400,000) 180,000.00 276,923.00 =180,000/.65 96,923.05 35%
NRANETB (35%
140,000.00 186,667.00 =140,000/.75 46,666.75 25%
*400,000)
SA (20%*400,000) 80,000.00 123076.92 =80,000/.65 43,076.92 35%
186,666.7
TOTAL 400,000.00 586,666.92    
2

Taxable
Fringe Benefit
  Fringe
Tax.
Benefit
Zero.Part of
Compensatio
n Income
a) Rank and File subject to Zero
90,000
threshold per
employee.
b) Resident citizens 276,923.00 96,923.05
c) NRA-NETB 186,667.00 46,666.75
d) Special Aliens 123,076.92 43,076.92
Option 2: Incase, there is a treaty between the Philippines and the Multinational Corp. Country:

Fringe benefit   1,000,000.00  

Employees rank and file (1M*60%) 600,000.00  
Supervisors (1M*40%) 400,000.00
FRINGE BENEFIT COMPUTATION
  Fringe Grossed Up  Formula FBT FBT rate
benefit Monetary Value
RC (45%* 400,000) 180,000.00 276,923.00 =180,000/.6 96,923.05 35%
5
NRANETB (35% 186,667.00 =140,000/.7 46,666.75 25%
*400,000) 140,000.00 5
SA (20%*400,000) 80,000.00 94,118.00 =80,000/.65 14,117.70 35%
TOTAL 400,000.00   557,707.50   157,707.50  

Compute for the Taxable Fringe Benefit and Fringe Benefit Tax.
Taxable Fringe Benefit Fringe Benefit Tax.
a) Rank and File Zero.Part of Compensation Zero
Income subject to 90,000
threshold per employee.
b) Resident citizens 276,923.00 96,923.05
c) NRA-NETB 186,667.00 46,666.75
d) Special Aliens 94,118.00 14,117.70