Junior Philippine Institute of Accountants

University of Cebu – Banilad Chapter

INCOME TAXATION- FRINGE BENEFITS

Problem # 1
(TRAIN LAW)

Soleil received the following from F & F Company

Monthly Salary 15,000
Monthly rice allowance 1,500
13th month pay 15,000
Clothing allowance 7,500
Grocery items allowance per month 1,200

The monthly rental of her apartment is being paid by the company at P11,500 a month.
How much is the monthly fringe benefit tax due on the apartment if Soleil is a supervisory
employee?

Problem # 2
(TRAIN LAW)

During the year, Montefalco Company purchased a brand new car for use by its marketing
manager. The car costing P1,350,000 was registered in the name of the manager. Most of
the time, the vehicle is being used for business purposes of the manager while from time
to time it is being used for personal purposes.

1. How much is the fringe benefit tax?

2. Suppose the company paid only 65% of the value of the car, while the balance was paid
by the manager. How much is the fringe benefit tax?
Problem #3
(TRAIN LAW)

During the year, Mercadejas Company approved a loan of P100,000 to its manager at
7.5% interest rate. The loan is payable in 6 months.
How much is the fringe benefit tax?

Problem #4
(TRAIN LAW)

Gallagher Corporation owns a condominium unit. During the year, the said corporation
furnished and granted the said property for the residential use of its Assistant Vice-
President. The zonal value amounts to P10,000,000 while its fair market value per Real
Property Tax Declaration amounts to P8,000,000.

How much is the monthly fringe benefit tax due thereon?

Problem #5
(TRAIN LAW)

On December 2019, Perez Company paid P6,500 for the monthly rental of a residential
house of Mr. Julius Escobar, the company's manager in Baguio City.

Compute the fringe benefit tax.

TRUE OR FLASE

1. The tax base of the fringe benefit tax is the gross-up monetary value of the fringe
benefit
2. Membership fees, dues and other expenses borne by the employer for his employee
on social and athletic clubs or other similar organizations are taxable fringe
benefits of the employee in full
3. Rank and file employees are subject to fringe benefit tax
4. The exemption of any fringe benefit from the fringe benefit tax shall not be
interpreted to mean exemption from any other income tax unless the same is
likewise exempt by law
5. Holiday and vacation expenses of the employee borne by his employer shall be
treated as taxable fringe benefit
6. The personal expenses of employees shouldered by the employer are not deemed
as fringe benefits
7. Household of the employee borne by the employer such as salaries of household
help, personal driver or other similar personal expenses are taxable fringe benefits
8. Managerial or supervisory employees are exempt to fringe benefit tax
9. If the fringe benefit is granted in money, or is directly paid for by the employer,
then the value is the amount granted or paid for
10. Fringe benefit tax is not subject to a final withholding tax
THEORIES

1. Facilities or privileges furnished or offered by an employer to his employees that

are offered by the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employees
A. Fringe Benefit
B. Fringe Benefit tax
C. De Minimis Benefit
D. Grossed-up Monetary Value

2. Fringe benefits not subject to fringe benefits tax include which of the following?
A. De minimis benefits
B. Fringe benefits which are authorized and exempted from income tax under the
Code or under any special law
C. Contributions of the employer for the benefit of the employee to retirement,
insurance, and hospitalization benefit plans
D. Benefits given to the rank-and-file, whether granted under a collective
bargaining agreement or not
E. All of the above

3. The employer subject to the fringe benefit tax may be a/an

A. Corporation
B. Individual
C. Professional Partnership
D. All of the above

4. Means all employees who are holding neither managerial nor supervisory position
A. Officers
B. Managerial employees
C. Supervisory employees
D. Rank-and-file employees
5. Those who, in the interest of the employer, effectively recommend such managerial
actions if the exercise of such authority is not merely routinary or clerical in nature
but requires the uses of independent judgment
A. Officers
B. Managerial employees
C. Supervisory employees
D. Rank-and-file employees

6. Which is true about housing privilege taxable as fringe benefit?

A. If the employer owns a residential property where the employee resides, the
monetary value of the fringe benefit is 50% of the annual value, which is 5% of the
market or zonal value, whichever is higher
B. If the employer purchases a residential property where the employee resides,
the monetary value of the fringe benefit is 50% of the annual value, which is 5% of
the acquisition cost exclusive of interest
C. If the employer purchases a residential property and transfers ownership to the
employee for residential use at a price less than the employer's acquisition cost,
the monetary value is fair market or zonal value, whichever is higher less cost
to the employee
D. All of the above

7. Which is not part of de minimis benefits?

A. Clothing allowance
B. Actual medical benefits
C. Monetized unused vacation leave credits
D. Monthly pay

8. Which is not a characteristic of the fringe benefit tax?

A. A final tax
B. An income tax
 C. Payable by the employer
D. Imposed upon the monetary value of benefits

9. The de minimis benefits not exceeding their thresholds are

A. Exempt from income tax
B. Subject to fringe benefit tax
C. Subject to regular tax
D. Deductions from gross income

10. Any good, service, or other benefit furnished or granted by an employer in cash or
in kind in addition to basic salaries, to an individual employee (except rank-and-
file employee)
A. Fringe Benefit
B. Fringe Benefit Tax
C. De Minimis Benefit
D. Grossed-up Monetary Value

11. Which of the following is subject to fringe benefit tax?

A. compensation income of the rank and file employees
B. fringe benefit of the rank and file employees
C. compensation income of the managerial employees
D. fringe benefit of the managerial employees

12. The following concepts denote exemption from the fringe benefits tax, except
A. convenience of the employer
B. necessity to the business or trade
C. welfare and benefits of the employee
D. de minimis benefits
13. As a rule, fringe benefit furnished or granted in cash or in kind by an employer to
an individual employee maybe subject to the fringe benefit tax, if given to
1. Rank and file employees
2. Managerial employees
3. Those holding supervisory positions
A. 1 and 2 only C. 2 and 3 only
B. 1 and 3 only D. 1, 2 and 3

14. The fringe benefit tax is

1. Imposed on the employer
2. Withheld at source
3. Deductible by the employer
A. 1 and 2 only C. 2 and 3 only
B. 1 and 3 only D. 1, 2 and 3

15. With regard to the amount on which the fringe benefit tax rate is applied, which
statement is wrong? The tax benefit rate is applied on
A. The monetary value of the fringe benefit
B. The gross-up monetary value of the fringe benefit
C. The amount deductible by the employer from gross income
D. Both accounts of the fringe benefit and the fringe benefit tax

16. The following fringe benefits are not subject to fringe benefit tax, except
A. if required by the nature of or necessary to the trade, business or
profession of the employer
B. contributions of the employer for the benefit of the employee to
retirement, insurance and hospitalization benefit plans
C. benefits given to the rank and file employees
D. if given for the convenience or advantage of the employee
17. Basic rules on fringe benefits tax, except
A. Fringe benefit given to rank and file employees is not subject to
fringe benefits tax
B. Fringe benefit given to a supervisory or managerial employee is
subject to fringe benefits tax
C. De minimis benefit whether given to rank and file employee or to
supervisory or managerial employee is not subject to fringe benefit
tax
D. The fringe benefit tax is a tax paid by the managerial or supervisory
employee.

18. Which statement is wrong? The fringe benefit tax is

A. imposed on the employer
B. imposed on the managerial or supervisory employee
C. withheld at source
D. deductible by the employer

19. The grossed-up monetary value of fringe benefit subject to fringe benefit tax
received by a non-resident alien individual not engaged in trade or business in
the Philippines is
computed by dividing the monetary value of the fringe benefit by
A. 75% C. 85%
B. 25% D. 15%

20. The following fringe benefits are not subject to fringe benefits tax, except:
A. Fringe benefits given to the rank and file employees, whether
granted under a collective bargaining agreement or not
B. Contributions of the employer for the benefit of the employees to
retirement, insurance and hospitalization benefits plans
C. De minimis benefits, as defined in the rules and regulations to be
promulgated by the Secretary of Finance, upon recommendations of
the Commissioner.
D. Fringe benefits furnished or granted by the employer to its
managerial and supervisory employees.
SOLUTIONS:

Problem #1:

Monetary value of the benefit (11,500 x 50%) P5,750

Divide by monetary value factor 65%
Grossed-up monetary value P8,846
Rate of tax 35%
Monthly fringe benefit tax P3,096

* Since there is no transfer of ownership, the monetary value pf the benefit is 50% only
of the entire value

Problem #2:
1. ) Monetary value P1,350,000
Divide by 65%
Grossed-up monetary value P2,076,923
Rate of tax 35%
Fringe benefit tax P 726,923

2.) Monetary value (1,350,000 x 65%) P877,500

Divide by 65%
Grossed-up monetary value P1,350,000
Rate of tax 35%
Fringe benefit tax P 472,500
Problem #3
Interest at benchmark rate (100,000 x 12% x 6/12) P6,000
Less: Interest at special rate (100,000 x 7.5% x 6/12) 3,750
Interest forgone/value of benefit P 2,250
Divide by 65%
Grossed-up monetary value P3,462
Rate of tax 35%
Fringe benefit tax P1,212

Problem #4
Monetary value [5%(10,000,000)] x 50% P250,000
Monthly rental value (250,000/12) P 20,833
Divide by 65%
Grossed-up monetary value P 32,051
Rate of tax 35%
Fringe benefit tax P 11,218

Problem #5
Grossed-up monetary value (6,500/65%) P10,000
Multiply by the taxable portion 50%
Grossed-up monetary benefit P 5,000
Multiply by the tax rate 35%
Fringe benefit tax P 1,750
TRUE OR FALSE THEORIES
1. T 1. C
2. T 2. E
3. F 3. D
4. T 4. D
5. T 5. C
6. F 6. D
7. T 7. D
8. F 8. B
9. T 9. A
10. F 10. A
11. D
12. C
13. C
14. D
15. A
16. D
17. D
18. B
19. A
20. D