FRINGE

BENEFITS
 + The term “fringe benefit”
Fringe Benefit means any good, service, or
Subject to the benefit other than the regular
salary and allowances received
Fringe Benefits by an employee, and which
Tax (“FBT”) may be furnished or granted in
cash or in kind by an employer
to an individual employee.
Coverage

+ Fringe benefits subject to FBT are those

benefits given or furnished to
managerial or supervisory employees,
and not to the rank and file.
General Rules in the Valuation of Fringe Benefits
A. 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.

B. If the fringe benefit is granted or furnished by the employer in property and ownership
is transferred to the employee, then the value of the fringe benefit shall be equal to the fair
market value (“FMV”) of the property.

Note: The FMV of real property is the FMV determined by the BIR Commissioner or
the FMV determined by the Provincial or City Assessor, whichever is higher.

C. If the fringe benefit is granted or furnished by the employer in property but the
ownership is not transferred to the employee (i.e., only the “usufruct” or the right to use
the property is transferred), the value of the fringe benefit is equal to the depreciation
value of the property. If the property is not owned by the employer but being leased out to
the employer, the value of the fringe benefit is equal to the rental or lease payment of the
employer.
 Tax rate = Final Tax of 35%

Rate of Tax
and Tax Tax Base = Grossed up
monetary value (“GUMV”) of the
Base fringe benefit

GUMV = Monetary value (“MV”)

of the fringe benefit ÷ 65%
Taxation of
A non-resident alien not engaged in trade
or business in the Philippines who receives
a fringe benefit is subject to the fringe
Fringe benefit tax as follows:

Benefit of Rate
(25%)
- twenty-five percent

NRANETB Tax Base - the grossed-up monetary

value of the fringe benefit
computed by dividing
the monetary value of
the fringe benefit by
seventy-five percent
(75%).
NOTA BENE:
A. The final tax is imposed whether the employer is an
individual, partnership, or corporation, regardless of whether
the employer is taxable or not, or the government and its
instrumentalities.

B. The fringe benefit tax is a tax of the employee. It is a tax on

the income or benefit received by the employee. However, for
convenience, the tax is imposed on the employer. The employer
is required by law to pay the tax for and in behalf of the
employee.
Filing of Return and Payment of Tax
The fringe benefit tax is a final income tax on the employee to be
“withheld” by the employer. The employer shall file the Quarterly
Remittance Return of Final Income Taxes Withheld on Fringe
Benefits Paid to Employees Other Than Rank and File (BIR Form
No. 1603Q) and pay the tax “withheld” on or before the last day of
the month following the close of the calendar quarter during which
“withholding” was made.

With respect to employers enrolled with the Electronic Filing and

Payment System (“eFPS”), the deadline for e-filing BIR Form No.
1603Q and e-paying the tax due thereon shall be five (5) days later than
the deadline for manual filing.
Valuation of
FBs subject to
FBT
 FB Value of MV of
Benefit Benefit
(A) Housing Privilege
Case 1: ER lets EE use ER-leased property Rent paid by ER 50% of Value
5% of FMV
(higher of zonal
Case 2: ER lets EE use ER-owned property or assessor’s 50% of Value
value)
5% of acquisition
Case 3: ER buys property in installment and lets cost exclusive of
the EE use the same interest 50% of Value

Case 4: Transfer to EE of ER’s property Higher of cost or Value

FMV
Difference
Case 5: Transfer to EE of ER’s property at less between the
than the acquisition cost of ER FMV and the Value
cost to EE
 FB Value of MV of
Benefit Benefit

(B) Expense Accounts

(1) Allowance subject to liquidation Amounts paid Value

by ER

Amounts
(2) Amounts reimbursed by ER reimbursed by Value
ER
 FB Value of MV of
Benefit Benefit

(C) Motor Vehicle

Case 1: ER buys vehicle in the name of EE Cost Value
Case 2: ER gives EE cash to buy vehicle Cash received Value
Amount
Case 3: ER shoulders portion of cost shouldered by Value
ER
20% of
Case 4: ER purchases vehicle on installment in acquisition cost Value
the name of EE (exclusive of
interest)
Case 5: ER lets EE use ER-owned vehicle 20% of 50% of Value
acquisition cost
Case 6: ER lets EE use ER-leased vehicle Rentals paid for 50% of Value
vehicle
Case 7: ER lets EE use ER-owned yacht 5% of Value
acquisition cost
 FB Value of MV of
Benefit Benefit

(D) Household Expenses

(1) Salaries of household help, driver, etc. Amount of Value

salaries paid

(2) Payment for other similar expenses like Amount paid Value
 FB Value of MV of
Benefit Benefit

Difference
between 12%
Value
(E) Less than Market Rate Interest on and the

Loans interest
charged

(F) Social and Athletic Club Fees Amounts paid Value

by ER for EE
 FB Value of MV of
Benefit Benefit
(G) Expenses for Foreign Travel
(1) No documentary evidence that the Amounts
foreign travel was in connection with shouldered by Value
business meeting or convention ER

(2) There is documentary evidence that the foreign

travel was in connection with business meeting
or convention:

(i) 30% of cost of first class ticket;

(ii) Excess of lodging cost over $300/day Amounts paid by Value
(iii) Travelling expenses for the travel of EE’s ER
family
 FB Value of MV of
Benefit Benefit

(H) Holiday and Vacation Expenses Amounts borne Value

by ER

(I) Educational Assistance

(1) Education of EE UNLESS education is
connected with the ER’s business and EE is Amount paid by
obligated to remain in the employ of the ER Value
ER for a certain period of time
(2) Education of EE’s dependents UNLESS
assistance is provided thru a competitive Amount paid by
scheme under a scholarship program of the ER Value
ER
 FB Value of MV of
Benefit Benefit

(J) Cost of Insurance borne by ER for the

Premiums or
EE UNLESS the contribution is pursuant
contributions Value
to existing law (ex. SSS, GSIS,
paid by ER
PhilHealth), or if the ER is paying for
group insurance of the
employees
Higher of book
value or FMV
(K) Stock Options: Upon exercise of the Value
of
stock option by a
the shares,
managerial/supervisory employee
less the
exercise price
Other Fringe Benefits
Not Subject to Fringe
Benefits Tax
Other Fringe Benefits Not Subject to
Fringe Benefits Tax
A. Fringe benefits which are authorized and exempted from income
tax under the Tax Code or under special law;

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, whether granted under a

collective bargaining agreement or not;
Other Fringe Benefits Not Subject to FBT
D. 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;

E. If the grant of the fringe benefit is for the convenience or advantage of the
employer.

1. In the case of meals, they must be furnished on the business premises of

the employer.

2. In the case of lodging, the lodging must be furnished on the business

premises of the employer and the employee must be required to accept such
lodging as a condition of his employment in order for the employee to
properly perform the duties of his employment.
F. “De minimis” Benefits

“De minimis” benefits which are exempt from the income tax
on compensation as well as from the FBT shall 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:
1. Monetized unused vacation leave credits of
employees (in the private sector) not exceeding 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 ₱1,500 per semester, or ₱250 per month
(or ₱3,000 per year);
4. Rice subsidy of ₱2,000 or one (1) sack of 50 kg. of rice per
month amounting to not more than ₱2,000, (or ₱24,000 per
year);

5. Uniform and clothing allowance not exceeding ₱6,000 per

annum;

6. Actual medical assistance, e.g. medical allowance to cover

medical and healthcare needs, annual medical/executive check-
up, maternity assistance, and routine consultations, not
exceeding ₱10,000 per annum;
7. Laundry allowance of ₱300 per month, (or ₱3,600 per year);

8. Employee achievement awards, e.g. for length of service, loyalty,

safety achievement, etc. To be exempt –

a. the award must be in the form of tangible personal

property other than cash or gift certificates;

b. the annual monetary value must not exceed ₱10,000; and

c. the award must be given under an established written

plan which does not discriminate in favour of highly paid
employees.
9. Gifts given during Christmas and major anniversary
celebrations not exceeding ₱5,000 per employee per annum;

10. Daily meal allowance for overtime work and

night/graveyard shift not exceeding twenty-five percent (25%)
of the basic minimum wage on a per region basis;
11. Benefits received by an employee by virtue of a collective
bargaining agreement (“CBA”) and productivity incentive schemes.
Provided, the total annual monetary value received from both the CBA
and productivity incentive schemes combined, do not exceed Ten
Thousand Pesos (₱10,000) per employee per taxable year.
NOTA BENE:
a. The abovementioned eleven (11) items are not only exempt from the
FBT but also from the withholding tax on compensation income of
managerial, supervisory, and rank and file employees.

b. The amount of “de minimis” benefits conforming to the

abovementioned prescribed ceilings shall not be considered in determining
the ₱90,000 ceiling of “13th month pay and other benefits” excluded from
gross income under Section 32 (B)(7)(e) of the Tax Code.

Provided that, the excess of the “de minimis” benefits over their
respective ceilings shall be considered as part of “13th month pay and
other benefits” and the employee receiving it will be subject to tax
only on the excess over the ₱90,000 ceiling.
END