Co The rules on Fringe Benefit Tax are applicable for an employer-business organization which maybe clasgi, beats either a: sole-proprietorship, Partnership, and corporation, whether public, private, profit or non. Profit. Fringe Benefit Tax for Individuals and Corporations — Fringe Benefit Tax, - Is defin fringe benefit fur deemed a final incor sidered as a fringe ed as a final income tax imposed on the grossed-up monetary value of taxable hhed/paid by the employer to its managerial and supervisory employees. Said tax is me tax due from the employee who earned the income but is mandated by law to be con. benefit tax withheld and paid by the employer. Fringe Benefit, - Is defined as any good, service or other benefits furnished or granted in cash or in kind, by an employer to its employees. Rule I. Non-Taxable Fringe Benefits ‘These are fringe benefits that are not subject to the final income tax (fringe benefit tax) as follows: Fringe benefits which are authorized and exempted from income tax under special laws 2 Contributions of employer for benefit of employes to retirement, insurance, hospital benefit plans Fringe benefits to the employee which are required by the nature of, or necessary to the trade, business or Practice of profession of the employer 4. The use of aircrafts (airplanes and helicopters) owned and maintained by the owner-employer shall be treated as purely business expenses and not a taxable fringe benefit Fringe benefits to the employees which are for the convenience of the employer 6. De minimis benefits Housing benefits of military officers of the Armed Forces of the Philippines Housing benefits if the dwelling unit is situated within or adjacent to the business premises 9. Educational benefits to children of public school teacher; 10. Benefits given to the rank and file employees, under a collective bargaining agreement or not The term “De Minimis Benefits,” shall, in general, be limited to facilities or privileges that are relatively of small value and are offered or furnished by the employer merely as a means of promoting the health, good- will, contentment, or efficiency of his employee. These “de minimis benefits” (only up to the extent of the amount of cap or ceiling if there is any) are exempt from income tax both on the part of the employer and the employee. Facilities and privileges of relatively small value, - Ordinarily, facilities and privileges (such as entertain- ment, medical services, of so-called “courtesy discounts” on purchases) otherwise known as “de minimis benefits” furnished or offered by an employer to his employees are not considered as compensation income subject to income tax and consequently not to withholding tax, if such facilities or privileges are of relatively small value and offered or given to promote the health, goodwill, contentment or efficiency of the employees ‘The following are “De Minimis Benefits” (BIR RR. 05-2011) 1. Monetized unused v: leave credits of private employees not exceeding ten (10) days during the year 2. Monetized value of vacation and sick leave credits paid to government officials and employees. 3. Medical cash allowance to dependents of employees not exceeding P1,500.00 per semester or P250,00 / 10 4. Rice subsidy of not over P2,000 per a or one (1) sack of 50 kg, rice per month amounting to han P2,000 as tax ~exempt 5. Uniforms and clothing allowances at a maximum amount of P6,000 a year 6. Actual medical assistance/benefit, e.g. medical allowance to cover medical and healthcare needs, annual medical executive check-up, maternity assistance and routine consultations not over P10,000,00/year 7. Laundry allowance of not exceeding P300.00 per month CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 1128 Employees achievement awards, e.g. for length of service or safety achievement, which must be in the rm of tangible personal property other than cash or gift certificate, with a maximum of P10,000 annual monetary value under an established written plan which does not dis ployees To, pun, Sven during Christmas, major anniversary celebrations not exceeding PS,000 per employee/year. 10. Daily meal allowances for overtime work and night/graveyard shift not over 25% of the basic minimum wage on a per region basis. Flowers, fruits, books or similar items given to employees under special circumstances, e.g. on account of illness, marriage, birth of a baby, etc. shall now be treated as part of compensation income subject to basic income tax and withholding tax on compensation. All other benefits granted to employees (rank & file) which are not included in the above enumerated items of “de minimis benefits” shall not be considered as “de minimis benefits” and hence shall be subject to basic income tax as well as to withholding tax on compensation. All other benefits granted to employees (managerial and supervisory employees) which are not included in the above enumerated “de minimis benefits” shall be subject to the fringe benefit tax and not under basic income tax and withholding tax at source. Any amount given by the employer as benefits to its employees, whether classified as “de minimis benefits” or fringe benefits, shall constitute as deductible business expense upon such employer-company. Treatments of De Mini 1. The amount of “de determining the P90,000 per year c 32 (b) 7 (¢) of the Tax Code. Benefits under the BIR Revenue Regulation. No. 10-2008 benefit” conforming to the ceiling herein prescribed shall not be considered in g of “other benefits” excluded from the gross income under Section Provided that, the excess of the “de minimis benefits” over their respective ceilings shall be considered as part of “other benefits” and the employees receiving it will be subject to tax only on the excess over the 90,000 per year ceiling, 2. Provided further, that Minimum Wage Earner receiving “other benefits” exceeding the P90,000 per year limit shall be taxable on the excess benefits, as well as on his other salaries and wages just like an employee receiving compensation income (only beyond the maximum statutory minimum wage items which are still exempt from income tax, per court decision) 3. The exemption of any fringe benefit from the fringe benefit tax imposed under this section shall not be interpreted to mean exemption from any other income tax imposed under the Tax Code except if the same is likewise expressly exempt from any income tax under the Tax Code or under any existing law. ‘Thus, if the fringe benefit is exempted from the fringe benefits tax, the same may, however, still form part of the employee’s gross compensation income which is subject to basic income tax, hence likewise subject to a withholding tax on compensation income payment. : Rule II. Taxable Fringe Benefits These are fringe benefits that are subject to the final income tax (fringe benefit tax). The fringe benefits are received/earned by managerial or supervisory employees but the employer is mandated by law to shoulder, withhold and pay said fringe benefit tax for and in behalf of its employees. * 1, Housing Benefits 2. Expense Account Benefits 3. Vehicle Benefits 4. Household Personnel Benefits CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 3Interest on Loan Benefits Membership Fees, Du Holiday and Vacation F Educational Assistance Benefits to the employee or his dependents 9. Life, Health, Non-Life Insurance Premiums Benefits 10. Foreign Travel Benefits 11. Other Unspecified Fringe Benefits, in general and athletic clubs ete. and Other Expenses Benefits in soci xpenses Benefits eae . Note: If the above fringe benefit items were given to rank and file employees, then these fringe benefits shalt ‘not be subject to the final income tax (fringe benefit tax), instead these shall be subject to 0% to 38% basic income tax on the part of the rank and file employees. Rule IIL. Tax Treatments of Fringe Benefits in General In conformity with the provisions under the BIR Revenue Regulation no, 10-2008, the fringe benefits shall be treated/classified as follows; 1. If the fringe benefit (not de minimis benefit) is given to an officer (company employee with a supervisory or managerial position), then such is subject to the fringe benefit tax on the part of the employer but is exempt from the final income tax or from the basic income tax on the part of the officer-employ 2. If the fringe benefit (not de minimis benefit) is given to a rank and file employee (company employee without a supervisory or managerial position), then such is not subject to the fringe benefit tax on the part of the employer but is either exempt from income tax or subject to basic income tax on the part of the rank and file employee. 3. Unspecified fringe benefit (one without specific description and is not a de minimis benefit)) given to an unspecified employee (one without specific designation as either a rank and file employee or an official, man- agerial, supervisory employee) is presumed to be a taxable fringe benefit (given to a managerial or supervi- sory employee) subject to the fringe benefit tax only on the part of the employer, hence there is no final in- come tax nor a basic income tax due from such employee. 4. If the fringe benefit given to the employee (officials or rank and files) is classified as a “de minimis bene fit.” (not subject to a cap or ceiling, or the amount up to the:imposed cap or ceiling if there is any) then such amount of “de minimis benefit” is exempt from income taxation on the part of the employer (no fringe bene- fit tax) and also on the part of the employee (no final income tax or basic income tax). 5. Any amount of a “de mi benefit,” in excess of the related /imposed amount of cap or ceiling, earned / received by any employee shall be treated as follows: a, If received /earned by a rank and file employee, such excess amount of “de minimis benefit” over its cap /cciling shall be treated as part of the “other benefits” also known as the total 13" month pay, bonus and other incentive pay where the 1" P90,000 or less per year is exempt from income ta However the excess amount of the “other benefits” over the 1" P90,000 per year shall be subject (0 the basic income tax on the part of said rank and file employee. b. However, if received/earned by a managerial or supervisory employee, such excess amount of “de minimis benefit” over its cap /ceiling shall be treated as part of the “other benefits” also referred to the total 13 month pay, bonus and other incentive pay where the 1" P90,000 or less is exempt from income tax. However the excess amount of the “other benefits” over the 1 P90,000 shall be subject to the fringe benefit tax on the part of the employer, but is exempt from income tax on the part of the official or rank and file employee. ule IV. Imposition of Fringe Benefit Tax i In faut except when said fringe benefit is exempted from the fringe benefit tax, a final income tax (fringe benefit tax) is hereby imposed on the grossed-up monetary value of taxable fringe benefits furnished CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX. 114or granted, to the managerial or supervisory employees, by the employer, whether the employer is proprietorship, partnership, corporation or the government and its agencies or instrumentalities. Grossed-Up Monetary Value x Fringe Benefit Tax Rate = Fringe Benefit Tax | Taxable Fringe Benefits Fringe Benefit If employees are classified as: 100 % or partially Tax Rates 1. Resident citizens, Resident aliens Grossed-Up Monetary Value Non-resident citizens, NRAEBP of taxable fringe benefits x 35% Grossed-Up Monetary Value NRA not engaged in business of taxable fringe benefits x 25% Grossed-Up Monetary Value 3._ Special alien/Filipino employees of taxable fringe benefits x 15% 4. In Special Economic Zones: i 1. Clark Special Economic Zone Grossed-Up Monetary Value | Same FBT rates applicable b. Subic Special Economic Zone of taxable fringe bens as the case maybe at © Other Free Trade Special Eco. 38%, 25%, 15% 2. The grossed-up monetary value of the taxable fringe benefit represents the whole amount of income earned by the employee which includes the net amount of money or net monetary value of property which has been received plus the amount of fringe benefit tax thercon otherwise due from the employee but paid by the employer for and in behalf of the employees. The grossed-up monetary value of the taxable fringe benefit shall be determined by dividing the monetary value of the taxable fringe benefit by the grossed up rates and in accordance with the following schedule: Monetary Value / Grossed Up Rates = Grossed Up Monetary Value Taxable Fringe Benefits Ifemployees are classified as: 100% or partially Grossed Up Rates 1. Resident citizens, Resident aliens Monetary Value Non-resident citizens, and NRAEBP__| of taxable fringe benefits 1 65% [2 NRA not engaged in business in Phil. Monetary Value of taxable fringe benefits | 15% 3. Special alien/Filipino employees ‘Monetary Value of taxable fringe benefits J 85% 4. In Special Economic Zones: 4. Clark Special Economic Zone Same tax rates applica- b. Subie Special Economic Zone Monetary Value ble as the case maybe, £. Other Free Trade Spec. Eco. Zone _| of taxable fringe benefits | at 65%, 75%, or 85% 3. Fringe Benefit Tax on taxable fringe benefits granted to the various classes of employees: The statutory formulas in determining the corresponding fringe benefit taxes on taxable fringe benefits are : Classes of Employees - Recipients: Resident Citizens, Resident Aliens, Non-Resident Citizens and Non-Resident Aliens Engaged in Business in the Philippines. Monetary Value of TFB / 65% = Grossed Up Monetary Value x 35% = Fringe Benefit Tax (FBT) & Classes of Employees - Recipients: Non-resident Aliens Not Engaged in Busines: CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX us PhilippinesMonetary Value of TFB / 75% = Grossed Up Monetary Value x 25% = Fringe Benefit Tax (FBT) b. Classes of Employees - Recipients: Special Aliens/Filipinos Employees Monetary Value of TFB / 85% = Grossed Up Monetary Value x 15% = Fringe Benefit Tax (FBT) Mlustrations /Formulas Classifications of Employees RGRA,NRC, NRANEBP SAFE NRAEBP 1. Actual Value of Fringe Benefits ____P160,000__P150,000_P250,000_ 2. Monetary Value of TRB (50%, 100%, 100%) 80,000 PI50,000 Divided by Grossed Up Rates: 10.75 3. Grossed Up Monetary Value of TFB P200,000 Multiplied by FBT Rates: X_25% 4. Fringe Benefit Tax on TFB 50,000 Allowed Deduction for All Fringe Benefits 123,077 P200,000_ 294,117 5. Allowed Deductions related to the fringe benefits given to employees: a. On Non-taxable Fringe Benefits, - the actual value of non-taxable fringe benefits which are exempt from the fringe benefit tax shall be treated as 100% part of the allowed deduction from the gross income on the part of the employer. tion for no.1 employees; RC, RA, NRC, NRAEBP, the exempt 50% of be treated as allowed deduction from the gross income. Example based on the above illus 160,000 witich is equal to P80,000 shi b. On Taxable Fringe Benefits, - the grossed up monetary value of the taxable fringe benefits which are Subject to the fringe benefit tax shall be treated as 100% part of the allowed deduction from the gross income on the part of the employer. Example based on the above illustrations for Nos. 1, 2 ,3, the sum of the grossed up monetary values of P123,077 + P200,000 + P294,117 which is equal to P617,194 shall be treated also as allowed deduction from the gross income. Rank and File Employees, - Means employees who are holding neither managerial nor supervisory positions. Managerial Employee ,- Means one who is vested with powers or prerogatives to lay down and execute man- agement policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipliné employees. Supervisory Employees, - Are those who, in the interest of the employer, effectively recommend such mana- gerial actions if the exereise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. Determination of the Amount (tax base) Subject to the Fringe Benefit Tax In general, the computation of the fringe benefit tax would entail the following: 1. Determine the actual value of the fringe benefits 2. Determine the monetary value (MV), - the proportion/percentage of the fringe benefits granted which is subject to the fringe benefit tax. CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 1163. Determine the grossed - up monetary value (GUMV) - the portion of the fringe benefits granted which is considered subject to the fringe benefit tax, This is the taxable amount/base on which the fringe benefit tax rate is applied. Rule V. Valuation Guidelines on Taxable fringe Benefits A. Non - Specific Types of Taxable Fringe Benefits The Tax Code allows for the cases where one hundred percent (100%) or only a portion (i.e. less than 100 %) of the fringe benefits is subject to the fringe benefit tax. Thus, in cases where the fringe benefits entail joint benefits to the employer and employee, the portion which shall be subject to the fringe benefit tax and the guidelines for the valuation of fringe benefits shall be as follows: is directly paid for by the employer, the value is the amount 1. If fringe benefit is granted in money, o granted or paid Monetary Value of TFB = Amount Granted or Paid x 100% 2. If the fringe benefit is granted or furnished by the employer in property other than money and ownership is transferred to the employee, then the value of the fringe benefit shall be equal to the fair market value of the property as determined in accordance with Sec. 6 (E) of the NIRC (Authority of the Commissioner to Prescribe Real Property Values). Monetary Value of TFB = Fair Market Value of Property x 100% 3. If the fringe benefit is granted or furnished by the employer in property other than money but ownership is not transferred to the employee, the value of the fringe benefit is equal to the depreciation value of the property. Monetary Value of TFB = Depreciation Value of Property x 100% B. Specific Types of Taxable Fringe Benefits For this purpose, the g ines for valuation of specific types of fringe benefits and the determination of the monetary value of the taxable fringe benefits are given helow. The taxable value shall be the grossed-up monetary value of the fringe benefit. 1. Housing Privilege/Benefit The determination of the monetary value depends on the following situations: a. If the employer leases a residential property for the use of his employee and the said property is the usual place of residence of the employee, the value of the benefit shall be the amount of rental paid thereon bythe employer, as evidenced by the lease contract. The monetary value of the taxable fringe benefit shall be fifty percent (30%) of the value of the benefit. Monetary Value of TFB = Rental or Lease Payment x 50% b. If the employer owns a residential property and the same is assigned for the use of his employee as his usual place of residence, the annual value of the benefit shall be five percent (5%) of the market value of the land and improvements, as declared in the Real Property Tax Declaration Form, or zon al value as determined by the BIR Commissioner pursuant to Section 6 (E) of the NIRC (Authority of the Commissioner to Prescribe Real Property Values), whichever is higher. The monetary value of the fringe benefit is fifty percent (50%) of the benefits ‘value. Monetary Value of TFB = (Higher of Fair Market Value or Zonal Value x 5%) x 50% €. If the employer purchases a residential property on installment basis and allows his employee to use the same as his usual place of residence, the annual value of the benefit shall be five percent (5%) of CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 7the acquisition cost, exclusive of interest. The monetary value of fringe benefit shall be fifty percent (50%) of the value of the benefits. Monetary Value of TEB_= (Acquisition Cost, except interest x 5%) x 50% 4. If the employer purchases a residential property and transfers ownership thereof, in the name of employee, the value of the benefit shall be the employer’s acquisition cost or zonal value as determined by the BIR Commissioner pursuant to Section 6(E) of the NIRC (Authority of the Commissioner to Prescribe Real Property Values), whichever is higher. The monetary value of the fringe benefit shall be the entire value of the benefit. Monetary Value of TFB = Higher of Acquisition Cost or Zonal Value x 100% €. Ifthe employer purchases a residential property and transfers ownership thereof to his employee for the latter’s residential use, at a price less than the employer's acquisition cost, the value of the benefit shall be the difference between the fair market value, as declared in the real property tax declaration form or zonal value as determined by the BIR Commissioner pursuant to Section 6(E) of the NIRC (Authority of the Commissioner to Prescribe Real Property Values), whichever is higher and the cost Price to the employee. The monetary value of the fringe benefit shall be the value of the benefits. Monetary Value of TFB = (Excess of the Fair Market Value or Zonal Value whichever is higher over the cost price to the employee) x 100% £ Housing privilege of military officials of the Armed Forces of the Philippines (AFP) consisting of officials of the Philippine Army, Philippine Navy and Philippine Air Force shall not be treated as taxable fringe benefit in accordance with the existing doctrine that the State shall provide its soldiers with necessary quarters which are within or accessible from the military camp so that they can be readily on call to meet the exigen cies of their military service. (exempt from the fringe benefit tax). A housing unit which is situated inside or adjacent to the premises of a business or factory shall not be considered as a taxable fringe benefit. A housing unit is considered adjacent to the premises of the busi- ness if it is located within the maximum of fifty (50) meters from the perimeter of the business premises. (exempt from the fringe benefit tax) Expense Account Benefit ‘The monetary value is 100% of the actual value of the fringe benefits. ‘a. Ingeneral, expenses incurred by the employee but which are paid by his employer shall be treat- ed as 100% taxable fringe benefits, except when the expenditures are duly receipted for and in the name of the employer and the expenditures do not partake the nature of a personal expenses attributable to the employee. Monetary Value of TFB = Expense Payment x 100% , b. Expenses paid for by the employee but reimbursed by his employer shall be treated as taxable fringe benefits except only when the expenditures are duly receipted for and in the name of the employer and the expenditures do not partake the nature of a personal expenses attributable t0 the employee. Monetary Value of TFB = Expense Payment x 100% ¢. Personal expenses of the employee (like purchases of groceries for the personal consumption of the employee and his family members) paid for or reimbursed by the employer to the employee CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 118 Niasshall be treated as 100% taxable fringe benefits of the employee whether or not the same are du- ly receipted for in name of the employer. Monetary Value of TFB = Expense Payment x 100% d. Representation and transportation allowances which are fixed in amounts and are regularly re- ceived by the employees as part of their monthly compensation income shall not be treated as taxable fringe benefits but the same shall be considered income subject to basic income tax. (ex empt from fringe benefit tax) 3. Motor Vehicle Benefit The determination of the monetary value depends upon the following situations: a. If the employer purchases the motor vehicle in the name of the employee, the value of the fringe benefit is the acquisition cost thereof, The monetary value of the fringe benefit shall be the entire value (100%) of the fringe benefit, regardless of whether the motor vehicle is used by the em- ployee partly for his personal purpose and partly for the benefit of his employer. Monetary Va Acquisition Cost x 100% of TI b. If the employer provides the employee with cash for the purchase of a motor vehicle, the owner- ship of which is placed in the name of the employee, the value of the benefit shall be the amount of cash received by the employee. The monetary value of the fringe benefit shall be 100% of the amount of cash received by the employee. The monetary value of the fringe benefit shall be the entire value of the fringe benefit regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer, unless the same was subjected to a withholding tax as compensation income. Monetary Value of TFB = Cash Grants x 100% If the employer purchases the car on installment basis, the ownership of which is placed in the name of the employee, the value of the benefit shall be the acquisition cost excluding interest, di- vided by five (5) years. The monetary value of the fringe benefit shall be the entire value of the benefit regardless of whether the motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer. & Monetary Value of TFB = (Acquisition Cost except Interest / 5 years) x 100% d. If the employer shoulders a portion of the amount of the purchase price of a motor vehicle the ownership of which is placed in the name of the employee, the value of the benefit shall be the amount shouldered by the employer. The monetary value of the fringe benefit shall be 100% of the entire value of the fringe benefit regardless of whether the motor vehicle is used by the em- ployee partly for his personal purpose and partly for the benefit of his employer. Monetary Value of TRB = Amount shouldered by the employer x 100% If the employer owns and maintain a fleet of motor vehicles for the use of the business and the employees, the value of the benefit shall be the acq' uisition cost of all the motor vehicles not nor- mally used for sales, freight, delivery service and other non-personal used divided by five (5) years. The monetary value of the fringe benefit shall be fifty per cent (50%) of the value of the benefit. Monetary Value of TFB. = (Acquisition Cost /5 years)- x 50% CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 1195. normally used for sales, freight, deliver, service and other non-personal use. The monetary valye of the fringe benefit shall be fifty per cent (50 %) of the value of the benefit. Monetary Value of TFB = Rental or Lease Payment x 50% £. If the employer leases and maintains a fleet of monitor vehicles for the use of the business ang employees, the value of the benefit shall be the amount of rental payments for motor vehicles nox 8. The use of aircraft (including helicopters) owned and maintained by the employer shall be treateq as business use and not to be subject to the fringe benefits tax. (exempt from the fringe benefit tax) 1h, The use of yacht whether owned and maintained or leased by the employer shall be treated as taxable fringe benefit. The value of the benefit shall be measured based on the depreciation of g ht at an estimated useful life of 20 years. Monetary Value of TEB = (Acquisition Cost / 20 yeas) x 100% Household Expenses Benefit The monetary benefit is 100% of the actual value of the fringe benefit expenses of the employee which are borne by the employer for household personnel, such as personal household help, personal driver of the employee, or other similar personal expenses (like payment for homeowners association dues, gar bage dues, etc.) shall be treated as taxable fringe benefits. The monetary value of the fringe benefits shall be 100% of the household expenses value, Monetary Value of TFB = Household Expense Value or Payments x 100% Interest on Loan Benefit The monetary value is 100% of the actual value of the fringe benefits. If the employer lends money to his ‘employee free of interest or at any rate lower then twelve percent (12%), such interest foregone by the employer or the difference of the interest assumed by the employee and the rate of twelve per cent (12%) shall be treated as taxable fringe benefit. Monetary Value_of TFB = (Excess of the 12% Interest Over the Interest Actually Charged to the Employee) x 100% Membership Fees Benefit ‘The monetary benefits is 100% of the actual value of the fringe benefits. Membership fees, dues and other expenses borne by the employer for his employee, in social and athletic clubs or other similar organizations. these expenditures shall be treated as taxable fringe benefits of the employee in full. Monetary Value of TFB = Fees or Dues Payments x 100% Expenses for Foreign Travel Benefit ‘The determination of the monetary benefits depends upon the following situations: Reasonable business expenses which are paid for the foreign travel of his employee for the purpose of attending business meetings or conventions shall not be treated as taxable fringe benefits. In this in- stance, inland travel expenses (such as expenses for food, beverages and local transportation) except Jodging cost in a hotel (or similar establishments) amounting to an average of US $300.00 or less peF day, shall be subject to fringe benefit tax. The expenses should be supported by documents proving the actual occurrences of the meetings or conventions. The cost of economy and business class airplane ticket shall not be subject to a fringe tax benefit However, thirty per cent (30%) of the cost of first class airplane ticket shall be subject to the FBT. CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 120be on tee of documentary evidence showing that the employee’s travel abroad was in connec- uusiness meetings or conventions, the entire cost of the ticket, including the cost of hotel ac- commodations and other expenses incident hereto shouldered by the employer, shall be treated as tax- able fringe benefits. The business meetings shall be evidenced by official communications from business associates abroad indicating the purpose of the meetings. Business conventions shall be evidenced by official invitations, communications from the host organization or entity abroad. Otherwise, the entire cost thereof shoul- dered by the employer shall be treated as taxable fringe benefits of the employee. c. Traveling expenses which are paid by the employer for the travel of the family members of the empl- oyce shall be treated as taxable fringe benefit of the employee. 8, Holiday and Vacation Expenses Benefit ‘The monetary value is 100% of the actual value of the fringe benefits. Holiday and Vacation expenses of the employee borne by his employer shall be treated as taxable fringe benefits. Monetary Value of TFB = Holiday Vacation Expense Payments x 100% 9. Educational Assistance Benefits ‘The monetary value is 100% of the actual value of the fringe benefits. a. The cost of the educational assistance to the employee which are borne by the employer shal ral, be treated as taxable fringe benefit. However, a schol: shall not be treated as taxable fringe benefit if the education or study involved is directly connected with the employer's trade, business or profession, and there is a written contract between them that the em ployee is under obligation to remain in the employ of the employer for period of time that they mutually agreed upon. In this case, the expenditure shall be treated as incurred for the convenience and further ance of the employer's trade / business. in gene ship grant to the employee by the employer Monetary Value of TFB = Educational Assistance Expense Payments x 100% b. The cost of educational assistance extended by an employer to the dependents of an employee shalll be treated as taxable fringe benefits of the employee unless the assistance was provided through a competi- tive scheme under the scholarship program of the company. 10. Life and Non-Life Insurance Premiums Benefits. ‘The cost of life or health Insurance and other non-life Insurance premiums borne by the employer for his employee shall be treated as taxable fringe benefit. Monetary Value of TFB = Insurance Premium Payments x 100% ‘a. Contributions of the employer for the benefit of the employee, pursuant to the provisions of exist- ting law, such as under the Social Security System (SSS), (R.A. No. 8282, as amended) or under the Gevernment Insurance System (GSIS), (R.A. No. 8291), or similar contributions arising from the provisions of any other existing law; (exempt from the fringe benefit tax) b. The cost of premiums borne by the employer for the group insurance of his employees. (exempt from the fringe benefit tax) lustrations: Computing the Taxable Fringe Benefit Tax and Allowed Deduction from Gross Income Case 1. Housing Benefits CHAPTER 06, FRINGE BENEFITS AND FRINGE BENEFIT TAX 121~ 5 SS rene During the current year, ABC Corporation paid for the monthly rental ofa reside manager (Mr. De la Cruz) amounting to P66,000. In this case, the monthly taxable grossed-up monetary value of the said its branch manager (Mr. De La Cruz) shall be P48,529 computed as follow —— ES Actual Value of Fringe Benefit ¢ benefit furr Monetary Value of Taxable Fringe Benefit: | {iftaxable is 50% of Actual Value) led by the Grossed Up Rate Up Monetary Value of ie Fringe Benefit | | Multiplied by the Fringe Benefit Tax Rate | Fringe Benefit Tax on Taxable Fringe Benefit Allowed deduction from gross income of fringe benefits P33,000 + P17,769 house of its branch ed OF granted tg ABC Corporation shall take up in its books of accounts the P66,000 fringe benefit furnished to Mr. Dele Cruz under the account title “Fringe Benefit Expense” and the amount of P17,769 under the account title “Fringe Benefit Tax Expense”. The aforesaid amounts shall be fully allowed as deductions from the gross income of ABC Corporation and shall be taken up in the said employer's books of accounts as follows: Journal Entry: Debit: Fringe Benefit Expense P66, 000 Debit: Fringe Benefit tax Expense 17, 769 Credit: Cash 83,769 Note: 1. If the fringe benefit expense of P66,000 has already accrued but not yet paid, then use the account title “Fi .e Benefit Payable.” “Fringe Benefit Tax Payable.” Case 2. Expense Account Benefit If the fringe benefit tax of P17,769 has already accrued but not yet paid, then use the account title Masigla Company, a sole proprietorship business owned by Mr. Juan de la Cruz, granted the following fringe benefits to its employees in the current year: 1, Fringe Benefit given to rank and file employees 2. Fringe Benefit given to managerial and supervisory employees, household expense payments and personal expenses payments P215,000 140,000 a. The Fringe Benefit Tax Expense and the Fringe Benefit Expense are computed as follows: Actual Value of Fringe Benefit (100% of Expense Payments) ‘Monetary Value of Taxable Fringe Benefit 140,000.00 (taxable is 100% of Actual Value) Divided by the Grossed Up Rate 140,000.00 CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX — 1 68 Grossed Up Monetary Value of Fringe Benefit PRIS 385, “Multiplied by the Fringe Benefit Tax Rate as. Fringe Benefit Tax x | Allowed Deduction for Fringe Benefits P215,385 pis NFFB POO. | —py gage 12b. Journal entry for the fringe benefit (non-taxable fringe benefit) given to rank and file employees: Salary Expense (or Fringe Benefit Expense) P215,000 Cash /Payable 215,000 ¢. Journal entry for the fringe benefit (taxable fringe benefit) given to officers/employees: Fringe Benefit Expense 140,000 Fringe Benefit Tax Expense 75,385 ‘Cash / Payable 215,385 Case 3. Housing Benefits XYZ Corporation owns a condominium unit. During the current year the said corporation furnished and granted the said property for the residential use of its Assistant Vice-President. The fair market value of the said property as determined by the Commissioner pursuant to Section 6(E) of the Code amounts to 10,000,000 while its fair market valuc as shown in its current Real Property Tax Declaration amounts to 8,000,000. In this case, the higher fair market value of P10,000,000 as determined by the Commissioner shall be used in computing the monetary value of the fringe benefit so furnished or granted to said employee and the fringe benefit tax due thereon shall be computed as follows: ‘Actual Value of Fringe Benefit (P10,000,000 x 5%) 500,000 ‘Monetary Value of Taxable Fringe Benefit: (taxable is 50% of Actual Value) P250,000 | Divided by the Grossed Up Rate 1 65% ‘Grossed Up Monetary Value of Taxable Fringe Benefit P384,615 Multiplied by the Fringe Benefit Tax Rate X 35% Fringe Benefit Tax on Taxable Fringe Benefits P134,615 ‘Allowed Deduction for Fringe Benefits GUMV + NTFB. P634,615 In general, under this illustration, the XYZ Corporation shall not further claim deduction for allowing its Assistant Vice-President the use of its residential property since the cost for the use thereof has already been recovered as deduction from its gross income under “Depreciation Expense”. However, since the fringe ben- efit tax in the amount of P134,615 assumed and paid by XYZ Corporation has not yet been recovered by way of deduction from gross income, the same shall be allowed as a deduction from its gross income. XYZ Cor- poration shall take up the foregoing in its books of accounts, as follows: Journal Entry: Debit; Fringe Benefit Tax Expense P134,615 Credit: Cash /Fringe Benefit Tax Payable P134,615, Compliance Requirements on Fringe Benefit Tax 1, Who Shall File the Fringe Benefit Tax Return ‘ Every individual, corporation, partnership, association or government office required to deduct and withhold final income tax from fringe benefits furnished or granted to employees, other than rank and file employees. 2, When to File the Fringe Benefit Tax Return and Pay the Fringe Benefit Tax File the Fringe Benefit Tax Return on or before the 25" day of the month after the end of the calendar quarter. Pay the fringe benefit tax upon filing the Fringe Benefit Tax Return on quarterly basis (CHAPTER 06. FRINGE BENEFITS AND FRINGE BENEFIT TAX 123