Income Taxes

1.00 Basic Income Tax

2.00 FT on Passive Income
3.00 FT on Capital Gains
3.00 FBT

Employer
Employee
Must have Employer-Employee Relationship
1.00 Control Employer to Employee

Fringe Benefit
Nontaxable
Expenses Necessary/Convenience Of Employer
De minimis benefits
Exempted by law

Fringe benefits required by the nature of or necessary to the trade, business, or profession
advantage of the employer. Benefits authorised by and exempted from tax under special law
the benefit of the employee to retirement, insurance, and hospitalisation benefit plans. Ben
employees, whether or not granted under a collective bargaining agreement. However, the
compensation, unless otherwise tax exempt. De minimis (small value) benefits as defined and
regulations.

FBT is a FINAL TAX, NOT subjected to BIT

1.00 Must be given to Manager or Supervisor (not rank and file)
2.00 It was given in the Philippines
3.00 Should be a Fringe Benefit subject to FBT under the tax code

Example 1:
De Guzman, accounting manager, visits branches to check records, travel allowance -- 10,000
NON TAXABLE -- Necessary for business

Example 2:
 De Guzman, operations manager, 5pm na uuwi na siya, may rush order -- Meal Benefits P1,000
NON TAXABLE -- For convenience of employer

Example 3:
De Guzman, accounting staff, 10,000 Housing Benefits, works in Manila
TAXABLE BASIC TAX -- Due to Rank and File Employee

Example 4:
De Guzman, US Citizen, accounting manager in USA - Housing Benefit
NON TAXABLE

Example 5:
De Guzman, RC, accounting manager in USA - Housing Benefit
TAXABLE - BASIC

De minimis benefits

1.00 Exempted in FBT, BIT, WITHHOLDING TAX

Monetized unused vacation leave credits to private employees not exceeding ten (10) days during the year;
Monetized value of vacation and sick leave credits paid to government officials and employees;
Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester of P25
Rice subsidy of P2,000 or one sack of 50kg rice per month amounting to not more than P2,000;
Uniform and clothing allowance not exceeding P6,000 per annum;
Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/exec
Laundry allowance not exceeding P300 per month;
Employees achievement awards, e.g. for length of service or safety achievement, which in the form of a tangible
Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum
Daily meal allowance for overtime work not exceeding twenty five percent (25%) of the basic minimum wage;
Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentiv

Rulings:
1.00 If exceeded the ceiling/limit, the excess ay mapupunta sa "other benefits" - subject to limit of 90,000 - if exceed
13th month and other benefits

Example:
1.00 Monetized unused vacation leave credits to private employees not exceeding ten (10) days during the year;
De Guzman, empleyado ng MCDO Corp. in Japan, unused sick leave -- 10 days, 1,000 per day
NOT DE MINIMIS
TAXABLE - BASIC

Monetized unused vacation leave credits to private employees not exceeding ten (10) days during the year;
De Guzman, MANAGER, unused sick leave -- 10 days, 1,000 per day
NOT DE MINIMIS - SICK LEAVE
TAXABLE - BASIC
 Not included in FB subjected to FBT

Monetized unused vacation leave credits to private employees not exceeding ten (10) days during the year;
De Guzman, MANAGER, vacation leave -- 15,000, 1,200 per day -- Monetized 12.5 days
13th month -- 100,000, Basic Pay -- 200,000

2.00 Monetized value of vacation and sick leave credits paid to government officials and employees;
Example:
De Guzman, accounting manager of San Mateo, mayrong VLSL -- 20 days each -- monetized 1,000 per day
40K
Exempt

Employees achievement awards, e.g. for length of service or safety achievement, which in the form of a tan
monetary value not exceeding P10,000 received by the employee under an established written plan

Example:
De Guzman, 10years in service -- Achievement award -- 10,000
TAXABLE (NOT DEMINIMIS)

De Guzman, 10years in service -- Achievement award -- PERSONAL PROPERTY WORTH 15,000, Basic Pay -- 100,
*Assumed there's written plan
TAXABLE INCOME

Example:
A, employee of private company, receives:
basic pay
13th month
monetized VL
medical cash allowance
rice subsidy
medical allowance to A
LAUNDRY
achievement award - personal property
christmas gift
interest income - bank deposit
prizes - contest, philippines
prizes - contest, USA
14th month pay
valentine's gift

TAXABLE NET INCOME?

Total Exempted Income

FRINGE BENEFITS
Resident/Citizen/NRAETB
35%
Formula
MV / .65 * .35
Monetary Value = Actual Benefits except:
1. Rental - 50%
BIR Form 1603 - Used for Filing

Housing Actual Value of Benefits

1. Employer let yee used the property owned by yer
(property existed) 5% of the (FV v. Zonal Assessed
value, whichever is higher
100,000.00
2. Employer paid the rental of employee Rent Paid

Employee
Basic Pay -- 100,000
Rent -- 10,000
Taxable Net Income subj. to BIT

Employer Gross Profit

Taxable Net Income subj. BIT

3. Employer, bought property for employee, no transfer 5% of cost, exclusive of interest

of ownership
(no property existed)

50,000.00

Gross profit - Employer

Depreciation Expense
Interest Expense
FBT
Taxable Net Income
 4. Employer, property for employee, transfer of Cost, FV, whichever is higher
ownership -- CASH
(property existed)

FV or COST TO EMPLOYER,
whichever is higher less payment by
5. Yer, transfer of ownership of property, pinabayaran the EMPLOYEE

FOREIGN TRAVEL *for business purpose

w/ doc evidence w/o doc evidence
30% of the first class ticket
lodging cost -- excess over the 300 dollars per day
travelling expenses of employee's family

Exempted:
70% of the first class ticket
economy and business class ticket - 100%
inland travel expenses
300 dollars per day - lodging costs all are taxable

Example:
De Guzman, manager, pinadala sa america for business trip/business meeting
First class ticket 2,000.00
Pabalik, economy ticket 1,000.00
Pagdating sa america, tumuloy sa hotel, 2,000.00
kumain sa america at namasahe (inland travel expense) 1,000.00

w/ doc evidence w/o doc evidence

30%
600.00 2,000.00
- 1,000.00
800.00 2,000.00
- 1,000.00
Dollar 1,400.00 6,000.00
Peso 70,000.00 300,000.00
FBT 37,692.31 161,538.46

Interest - legal interest rate -12%

De Guzman, loaned 1M
Interest - 2%
1,000,000.00
10%
100,000.00
53,846.15
 Labor Code

Taxable
FBT or BIT
Fringe benefits’ are defined as any goods, services, or other benefits furnished or granted in c
employee

e, business, or profession or for the convenience or

om tax under special laws. Employer contributions for
sation benefit plans. Benefits given to rank and file
agreement. However, these are subject to WHT on
) benefits as defined and enumerated in the rules and

ce -- 10,000
nefits P1,000

Small in value
For the welfare of the employee

(10) days during the year;

d employees;
mployee per semester of P250 per month;
than P2,000;

e needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000.00 per annum;

which in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000
,000 per employee per annum;
of the basic minimum wage;
CBA) and productivity incentive schemes provided that the total annual monetary value received from both CBA and productivity incentive

ct to limit of 90,000 - if exceeded 90,000 - basic income tax

90K 82K
TRAIN OLD

(10) days during the year;

00 per day

(10) days during the year;

 (10) days during the year;

d employees;

monetized 1,000 per day

MONETIZED

nt, which in the form of a tangible personal property other than cash or gift certificate, with an annual
er an established written plan which does not discriminate in favor of highly paid employees;

RTH 15,000, Basic Pay -- 100,000

100,000.00 5,000 NOT EXCEEDED THE 90K CEILING

CEILING/LIMIT 13TH MONTH AND TAXABLE

OTHER BENEFITS
100,000.00 100,000.00
100,000.00 100,000.00
15 DAYS, 1K/ DAY 10,000.00 5,000.00
5,000.00 3,000.00 2,000.00
30,000.00 24,000.00 6,000.00
15,000.00 10,000.00 5,000.00
6,000.00 3,600.00 2,400.00
12,000.00 10,000.00 2,000.00
10,000.00 5,000.00 5,000.00
10,000.00 FINAL TAX
10,000.00 10,000.00
20,000.00 20,000.00
100,000.00 100,000.00
 10,000.00 10,000.00

65,600.00 227,400.00
90,000.00
137,400.00 140,000.00
155,600.00

NRANETB Special Alien

25% 35%

MV / .75 * .25 MV / .65 * .35

Note: Old Law, 15% for Special Alien. TRAIN Law, 35%

Monetary Value Example FBT

50% of the value
Yer, property used by yee,
assessed value 1M , FV 2M
50,000.00 26,923.08 YEARLY
50% Rent ni Manager, 10k/month 2,692.00
10,000.00
Deductible from Gross Income 12,692.00 (not subject to depreciation
of Yer

100,000.00 Employee FBT to BIR Zero

100,000.00
87,308.00

50% Yer bought property, cash paid:

300,000 per year
4 years to pay (Useful life - 5 years
PV - 1M
25,000.00 200,000 INTEREST (NOT INCLUD 13,461.54
50K per year
500,000.00
200,000.00
50,000.00
13,461.54
236,538.46
 100%

100%

50 pesos : 1 dollar

4 days
4 days
r other benefits furnished or granted in cash or in kind by an employer to an individual
employee

Subject to FBT:
Housing
Expense account
Vehicle of any kind
Household personnel (maid, driver and others)
Interest on loan at less than market rate to the extent of the difference between the market rate and act
membership fees, dues and other expenses borne by the employer for the employee in social and athleti
Expenses for foreign travel
 Holiday and vacation expenses
Educational assistance to employee or his dependents; and
Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the

membership fees, dues and other expenses borne by the employer for the employee in social and athleti
De Guzman, member of basketball club, fee 1,000
538.46

Expense account
De Guzman, grocery, 10,000
60% receipted to empployee, 40% to company
may katulong, 10,000 -- paid by company
monetized VL - 10,000 FOR 10 DAYS
may anak, paaral ng kumpanya - 10,000
went to palawan, vacation, 10,000 paid by company

ot exceeding P10,000.00 per annum;

nual monetary value not exceeding P10,000 received by the employee under an established written plan which does not discriminate in fa

d from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos (Php 10,000.00)per employee per taxa
3,000 -- excess "Other benefits"
100,000 + 3,000 103,000.00 13th month and other benefits
90,000.00
13,000.00 EXCESS -- TAXABLE
200,000.00
213,000.00 TAXABLE

whether public and private employee

Example: CEILING/LIMIT
A, employee of private company, receives:
basic pay 200,000.00 -
13th month 100,000.00 -
monetized VL 10,000.00
medical cash allowance 3,000.00
rice subsidy 20,000.00 24,000.00
medical allowance to A 10,000.00
LAUNDRY 3,600.00
achievement award - personal property 10,000.00
christmas gift 5,000.00
interest income - bank deposit FINAL TAX
prizes - contest, philippines -
prizes - contest, USA -
14th month pay -
 valentine's gift -
EXPENSES -
20,000.00

277,400.00 TAXABLE INCOME

exempt 110,000.00

De minimis are deductible in Gross Income of Employer

FBT is deductible from Gross Income
FB/Actual Value of Benefits are deductible from Gross Income
Except: if fringe benefit is subject to depreciation, not deductible -- actual value of benefits

subject to depreciation
 between the market rate and actual rate granted
the employee in social and athletic clubs or other similar organizations
ar amounts in excess of what the law allows.

the employee in social and athletic clubs or other similar organizations

6,000.00

10,000.00
-
10,000.00
10,000.00
36,000.00
19,384.62

which does not discriminate in favor of highly paid employees;

10,000.00)per employee per taxable year;

13TH MONTH AND TAXABLE
OTHER BENEFITS
200,000.00
100,000.00

-
 100,000.00
90,000.00
10,000.00 200,000.00 210,000.00
113,076.92

ual value of benefits