FRINGE BENEFIT TAX

What is a fringe benefit?

• 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)
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What is included in the definition of Fringe Benefit?

(1) Housing;
(2) Expense account;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver and others;
(5) Interest on loan at less than market rate to the extent of
the difference between the market rate and
actual rate granted
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What is included in the definition of Fringe Benefit?
(6) Membership fees, dues and other expenses borne by the
employer for the employee in social and athletic clubs or
other similar organizations;
(7) Expenses for foreign travel;
(8) Holiday and vacation expenses;
(9) Educational assistance to the employee or his
dependents; and
(10) Life or health insurance and other non-life insurance
premiums or similar amounts in excess of what the law
allows.
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What are the Fringe Benefits not subject to FBT?
1. Fringe benefits which are authorized and exempted
from income tax under the Code or under any special
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;
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What are the fringe Benefits not subject to FBT?
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 of
the employer.
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To which types of employees are FBT applicable?
- Managerial or supervisory employees
- Not to the rank and file.

• Rank and File employee means all employees who are

holding neither managerial nor supervisory position.

• Managerial employee - one who is vested with powers or

prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees.
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To which types of employees are FBT applicable?

"Supervisory employees" are 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 use of
independent judgment
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Who are employers subject to FBT

Employer may be:

• Individual;
• Professional partnership or a corporation, regardless
whether or not the corporation is taxable; and
• Government
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What is the FBT rate?

35%

What is the tax base of the FBT?

Grossed-up monetary value of the fringe benefit furnished,

granted or paid by the employer to the employee
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What do we mean by grossed-up monetary value?

Represents:
• whole amount of income realized by the employee which
includes the net amount of money or net monetary
value of property which has been received
+
• Amount of fringe benefit tax thereon otherwise due
from the employee but paid by the employer for and in
behalf of his employee.
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How do we determine the grossed-up monetary value?

Monetary value (MV) of the fringe benefit divide by 65%

(100% - 35% or current tax rate)

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How do you treat the fringe benefit tax?

- Final income tax on employee;

- The employer shall withhold and pay the tax on a quarterly
basis.
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What is the rate of FBT for NRANETB?

• 25% shall be imposed on the grossed-up monetary value

of the fringe benefit.
• The said tax base shall be computed by dividing the
monetary value of the fringe benefit by seventy-five per
cent (75%).
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Valuation of Fringe Benefit
Housing benefit Monetary Value (MV)
• Employer leases a • Value =Amount of rental paid
residential property for the by the employer (as evidenced
use of his employee by lease contract)
• Property is the usual place • MV = fringe benefit is 50% of
of residence of the the value of the benefit
employee
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Valuation of Fringe Benefit
Housing benefit Monetary Value (MV)
• Employer owns a residential • MV = 5% of FMV/ZV x 50%
property
• The same is assigned for the
use of the employee as his
usual place of residence
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Valuation of Fringe Benefit
Housing benefit Monetary Value (MV)
• Employer purchases a 5% of Acquisition cost
residential property on (exclusive of interest) x 50%
installment and allows his
employee to use the same as
his usual place of residence
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Valuation of Fringe Benefit
Housing benefit Monetary Value (MV)
• Employer purchases a MV is the entire value of the
residential property and benefit = employer’s
transfers ownership thereof acquisition cost or zonal value,
in the name of the whichever is higher
employee
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Valuation of Fringe Benefit
Housing benefit
• Employer purchases a
residential property; and
• transfers ownership
thereof to the employee for
the latter’s residential use; • Cost to the employee; PLUS
• at a price less than the
employer’s acquisition cost
Monetary Value (MV)
MV is the:
• entire value of the benefit.
Value of benefit is the
• difference between the FMV
(tax dec) v. zonal value,
whichever is higher
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A housing unit which is situated inside or adjacent to
the premises of a business or factory is NOT considered
a taxable fringe benefit.

A housing unit is considered adjacent to the premises of

the business if it is located within the maximum of fifty
(50) meters from the perimeter of the business
premises.
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Temporary housing for an employee who stays

in a housing unit for three (3) months or less is
NOT considered a taxable fringe benefit?
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Valuation of Fringe Benefit
Expense
Expenses incurred by the
employee but which are paid
by his employer.
Fringe benefit or not?
Treated as taxable fringe benefits.
Exception:
• 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 expense attributable
to the employee.
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Valuation of Fringe Benefit
Expense Fringe benefit or not?
Expenses paid for by the Taxable fringe benefits
employee but reimbursed by Except:
his employer 1. when the expenditures are duly
receipted for and in the name
of the employer; and
2. the expenditures do not

partake the nature of a

personal expense attributable
to the said employee.
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Valuation of Fringe Benefit
Expense Fringe benefit or not?
Personal expenses of the Taxable fringe benefits of the
employee (like purchases of employee whether or not the
groceries for the personal same are duly receipted for in
consumption of the employee the name of the employer.
and his family members) paid
for or reimbursed by the
employer to the employee
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Valuation of Fringe Benefit
Expense Fringe benefit or not?
Representation and Not a taxable fringe benefits but
transportation allowances the same shall be considered as
which are fixed in amounts taxable compensation income
and are regular received by the subject to the tax.
employees as part of their
monthly compensation
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Valuation of Fringe Benefit
Motor Vehicle MV
Employer purchases the - The value of the benefit is the
motor vehicle in the acquisition cost thereof.
name of the employee - The monetary value:
- 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.
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Valuation of Fringe Benefit
Motor Vehicle MV
• Employer provides - Value of the benefits = amount of cash received by
the employee with the employee.
cash for the purchase - MV of the fringe benefit = entire value of
of a motor vehicle, the benefit
• the ownership of - Regardless of whether the motor vehicle is used by
which is placed in the the employee partly for his personal purpose and
name of the partly for the benefit of his employer,
employee - Unless the same was subjected to a
withholding tax as compensation income.
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Valuation of Fringe Benefit
Motor Vehicle MV
• Employer purchases the - Value of the benefit = acquisition cost
car on installment basis; exclusive of interest, divided by five (5)
• The ownership of which is years.
placed in the name of the - MV of the fringe benefit = entire value of
employee. 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
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Valuation of Fringe Benefit
Motor Vehicle MV
• Employer shoulders a - The value of the benefit = amount
portion of the amount shouldered by the employer.
of the purchase price of - MV of the fringe benefit shall be the
a motor vehicle entire value of the benefit
• the ownership of which - Regardless of whether the motor
is placed in the name of vehicle is used by the employee partly
the employee. for his personal purpose and partly for
the benefit of his employer.
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Valuation of Fringe Benefit
Motor Vehicle MV
• Employer owns and - The value of the benefit = acquisition
maintains a fleet of cost of all the motor vehicles
motor vehicles - not normally used for sales, freight,
• for the use of the delivery service and other non-
business and the personal use
employees - divided by five (5) years.
- MV of the fringe benefit = 50% of the
value of the benefit
- MV = (A/5) x 50%
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Valuation of Fringe Benefit
Motor Vehicle MV
• Employer leases and Value of the benefit = amount of
maintains a fleet of rental payments for motor vehicles
motor vehicles not normally used for sales, freight,
• for the use of the delivery, service and other non-
business and the personal use.
employees
The monetary value of
the fringe benefit = fifty per cent
(50%) of the value of the benefit.
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Valuation of Fringe Benefit
Motor Vehicle MV
The use of aircraft Treated as business use and not be
(including helicopters) subject to the fringe benefits tax.
owned and maintained by
the employer
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Valuation of Fringe Benefit
Motor Vehicle MV
The use of yacht whether Treated as taxable fringe benefit.
owned and maintained or
leased by the employer The value of the benefit shall be
measured based on the depreciation of
a yacht at an estimated useful life of
20 years
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Valuation of Fringe Benefit

Household expenses Treatment

Expenses of the employee which are Treated as
borne by the employer for household taxable fringe benefit.
personnel, such as:
• Salaries of household help,
personal driver of the employee; or
• Other similar personal expenses
(like payment for homeowners
association dues, garbage dues, etc.
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Valuation of Fringe Benefit
Interest on loan at less than
market rate
Employer lends money to
his employee free of interest
or at a rate lower than six per
cent (6%)
Treatment
Interest foregone by the
employer or the difference of
the interest assumed by the
employee and the rate of 6%
shall be treated as a
taxable fringe benefit.
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Valuation of Fringe Benefit

Membership Dues Treatment

Membership fees, dues, and Taxable fringe benefits of the
other expenses borne by the employee in full
employer for his
employee, in social and
athletic clubs or other
similar organizations.
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Valuation of Fringe Benefit
Expenses for foreign travel Treatment
Reasonable business expenses which are Not be subject to
paid for by the employer for the foreign a fringe benefit tax.
travel of his employee for the purpose of
attending business meetings or The expenses should be
conventions supported by documents
proving the actual occurrences
Inland travel expenses (such as expenses of the meetings or conventions.
for food, beverages and local
transportation) except lodging cost in a
hotel (or similar establishments)
amounting to an average of US$300.00 or
less per day
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Valuation of Fringe Benefit
Expenses for foreign travel
The cost of economy and
business class airplane
ticket
Treatment
Not subject to a fringe benefit tax.
30 percent of the cost of first class
airplane ticket shall be subject to
a fringe benefit tax.
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Valuation of Fringe Benefit
Expenses for foreign travel Treatment
Travelling expenses which are Taxable fringe benefits of the
paid by the employer for the employee
travel of the family members
of the employee
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What is the effect in the absence of documentary
evidence showing that the employee's travel abroad
was in connection with business meetings or
conventions?

The entire cost of the ticket, including cost of hotel

accommodations and other expenses incident
thereto shouldered by the employer, shall be
treated as taxable fringe benefits.
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Evidence of business meetings

Official communications from business associates

abroad indicating the purpose of the meetings.
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Evidence of business convention

Business conventions shall be evidenced by official

invitations/communications from the host
organization or entity abroad.
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Effect if no evidence

The entire cost thereof shouldered by the employer

shall be treated as taxable fringe benefits of the
employee
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Valuation of Fringe Benefit

Holiday Expense Treatment

Holiday and vacation Treated as
expenses of the employee taxable fringe benefits
borne by his employer
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Valuation of Fringe Benefit
Educational assistance Treatment
to the employee or his
dependents
The cost of the In general, be treated as taxable fringe benefit.
educational assistance
to the employee which Exception:
are borne by the
employer - 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 employee is under
obligation to remain in the employ of the employer for period of time that
they have mutually agreed upon.

In this case, the expenditure shall be treated as incurred for the convenience and
furtherance of the employer's trade or business
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Valuation of Fringe Benefit
Educational assistance to the Treatment
employee or his dependents
The cost of educational assistance Treated as taxable fringe benefits of
extended by an employer to the the employee
dependents of an employee
Exception:
- The assistance was provided
through a competitive scheme under
the scholarship program of the
company.
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Valuation of Fringe Benefit
Life or health insurance Treatment
and other non-life
insurance premiums or
similar amounts in excess
of what the law allows
The cost of life or health Taxable fringe benefit,
insurance and other non- Exception:
life insurance premiums (a) contributions of the employer for
borne by the employer for the benefit of the employee, pursuant to the
his employee provisions of existing law, such as under the
SSS or GSIS or similar contributions arising
from the provisions of any other existing
law;
(b) the cost of premiums borne by the employer
for the group insurance of his employees
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Does exemption of any fringe benefit from

the fringe benefit tax mean exemption from any other
income tax?

No, unless the same is likewise expressly exempt from any other
income tax imposed under the Code or under any other 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 income tax, hence, likewise subject to a withholding tax on
compensation income payment.
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What do we mean by De Minimis Benefit?

The term "DE MINIMIS" benefits which are exempt from

the fringe benefit tax shall, in general, be limited to facilities or
privileges furnished or offered by an employer to his employees that
are of relatively small value and are offered or furnished by the
employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employees such as the following:
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De Minimis Benefits Amount

1. Rice allowance/subsidy P1,500/month or

1 sack of 50 kg.
rice/month
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De Minimis Benefits Amount
1. Medical cash allowance P1,500 per employee per
semester or 250 per
month (as amended by
Rev. Regs. 11-2018)
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De Minimis Benefits Amount
a. Laundry Allowance P300/ month

51
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De Minimis Benefits Amount
a. Uniform and Clothing Allowance P6,000 per annum

52
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De Minimis Benefits Amount
a. Monetized unused vacation leave Not exceeding ten (10)
credits days salary

53
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De Minimis Benefits Amount
a. Actual medical assistance, e.g. Not exceeding
medical allowance to cover medical P10,000.00/annum
and healthcare needs, annual
medical/executive check-up,
maternity assistance and routine
consultations

54
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De Minimis Benefits Amount
a. Employees achievement awards, e.g. Monetary value of
for length of service or safety P10,000.00/annum
achievement in the form of tangible
personal property other than cash or
gift certificate received by employee
under an established written plan,
which does not discriminate in favor
of highly paid employees

55
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De Minimis Benefits Amount
a. Gifts given during Christmas and Not exceeding
major anniversary celebrations P5,000.00/annum
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De Minimis Benefits Amount
a. Benefits received by an employee by total annual monetary
virtue of a collective bargaining value received from
agreement (CBA) and productivity both CBA and
incentive productivity incentive
schemes combined do
not exceed ten thousand
pesos (Php10,000.00)
per employee per
taxable year (Rev. Regs..
01-2015 dated January 5,
2015)
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De Minimis Benefits Amount
a. Daily meal allowance for overtime 25% of the basic
work and night/graveyard shift minimum wage on a per
region basis

58
FRINGE BENEFIT TAX
Revenue Memorandum Circular No. 050-18 provides that if the de
minimis benefits exceed the threshold provided by the law, it shall form
part of the P90,000 ceiling. Any amount in excess of P90,000 shall be
subject to withholding tax.
Example: Ms. A received annual clothing allowance amounting to
P10,000. Her 13th month pay is P80,000. No other benefits were
received for the entire year. In this case, since the prescribed
maximum amount for clothing allowance is only P6,000 the excess
of P4,000 shall be added to the 13th month pay, thereby the entire
benefits received amounted to P84,000. In this scenario, the same
shall still be exempt from income tax since the ceiling amount for
these other benefits is P90,000.00.
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How should the employer treat the amount of fringe benefit?

As a general rule, the amount of taxable fringe benefit and

the fringe benefits tax shall constitute allowable deductions from gross
income of the employer.
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How should the employer treat the amount of fringe benefit?

Exception: Only the FBT is the deductible expense:

- If the basis for computation of the fringe benefits tax is the
depreciation value, the zonal value or the fair market value.
- The value of the fringe benefit shall not be deductible and shall be
presumed to have been tacked on or actually claimed as depreciation
expense by the employer.
- If the aforesaid zonal value or fair market value of the said property is
greater than its cost subject to depreciation, the excess amount shall
be allowed as a deduction from the employer's gross income
as fringe benefit expense.