IRA Exercise No.

3: Fringe Benefits Tax

Individual Readiness Applied Exercise

 This activity allows you to apply tax laws, concepts, and principles.
 Should there be answers or items that you are unsure of or is a product of guesswork, it is
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A.
Fringe benefits – foreign travel
Plant ticket – first class
($3,500 x 30%) x P50 52,500
Meals ($3,000 - $1,800) x P50 60,000
Plant ticket – economy (tax exempt) -
Meals ($1,500 - $900) x P50 30,000
Total value of fringe benefits 142,500
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Allowable travel expenses of the taxpayer:
Grossed Up Monetary Value (142,500/65%) 219,230.77
Domestic travel 400,000,00
Foreign Travel expenses not subject to final tax:
Plane ticket, first class (3,500 x 70%) $2,450
Meals and lodging (3,000-1,200) 1,800
Plane ticket, economy 1,200
Meals and lodging (1,500 – 600) 900 $6,350
x P50 317,500
Total allowable travel expenses 936,730.77

B.
a. Local travel 378,675
De minimis benefits 72,000
Total value of fringe benefits 450,675
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b. Grossed-up monetary value
(450,675/65%) 693,346.15
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c. Fringe benefit tax (693,346.15 x 35%) 242,671.15

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C.
Grossed-up monetary value (P17,000)/65% P326,153.85
Multiplied by FBT rate 35%
P 9,153.85

D.
A. The fringe benefit tax is: - None. Exempt because the educational benefit is related to work.
(Employer’s benefit rule)

B. The operating expense allowed as deduction from business income of the employer is:
P65,280 – Only the monetary value is deductible because the benefit is tax-exempt.

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E.
Answer: P7,500,000 – monetary value

Answer: P5,000,000 – monetary value of housing benefits subject to FBT.

F. Answer: P19,000 – MV of FB

Answer: P10,230.77 – FB tax of a RC manaherial employee

G.
No. 1:
Fringe Benefits Tax:
Monetary value received:
Motor vehicle P1,020,000
De minimis benefits:
Rice allowance (147,200-18,000) 129,200
Medical allowance (101,800 – 10,000) 91,800
Total 221,000
Less – Other benefit exclusion (90,000) 131,000
Taxable monetary value (or value of benefit) P1,151,000
/ 65%
Grossed-up monetary value 1,770,769.23
x 35%
Fringe benefit tax P 619,769.23

No. 2:
Amount of deduction for employer:
Motor vehicle 1,020,000.00
Rice allowance 147,200.00
Medical allowance 101,800.00
Total fringe benefits expense (including de minimis) 1,269,000.00
Fringe benefits tax expense 619,769.23
Total deduction for employer 1,888,769.23

No. 3:
Non-taxable Monetary Value:
De minimis within ceiling:
Rice allowance 18,000
Medical allowance 10,000 28,000
Other benefits 90,000
Non-taxable monetary value 118,000

H.
1. Total value of fringe benefit
(956,250 + 430,750 + 750,000) 2,137,000
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material is used solely as an educational tool for distance and remote learning and for the personal use only of students enrolled in BA 127 FS 2022-2023.
 2. Fringe benefit tax to supervisor
(956,250/65%) x 35% 514,903.85
Fringe benefit tax to non-resident alien
(750,000/75%) x 25% 250,000.00
Total fringe benefit tax 764,903.85

Journal entry:
Fringe benefits expense 2,137,000
Fringe benefits tax expense 700,000
Cash 2,137,000
Fringe benefit tax payable 700,000

I.

Fringe benefit tax (P102,000/65%) x 35% P54,923.08

Income tax:
Net income before tax (P1,750,000/75%) P2,333,333.33
Add: Fringe benefits charge to miscellaneous expense 102,000
Total P2,435,333.33
Multiplied by corporate income tax rate 25%
Corporate income tax P608,833.33
Less: Income tax already paid (P2,500,000 – P1,750,000) 25,500
583,333.33
Tax recovered by the government P80,423.08

J.
Area Heads of Visayas:
Monetary value (9,520,000 x 5%) x 50% P238,000
/ 65%
Grossed up monetary value P366,153.85
x 35% 128,153.85

Area Heads of Mindanao:

Monetary value (6,800,000 x 5%) x 50% P170,000
/ 65%
Grossed up monetary value P261,538.46
x 35% 91,538.46
Total Fringe Benefits Tax P219,692.31

K.
1. Non-taxable monetary foreign travel benefits:
First class tickets for Jessie:
(P125,000 x 70%) P 87,500
Inland travel expenses for Jessie:
$300 x 5 days x P50 75,000
Non-taxable monetary foreign travel benefits P162,500

You may not under any circumstances, transmit, reproduce, distribute, display or lend, in whole or part, any of the contents provided in this document. Access to this
material is used solely as an educational tool for distance and remote learning and for the personal use only of students enrolled in BA 127 FS 2022-2023.
 2. Taxable monetary foreign travel benefits:
First class tickets for Jessie
(P125,000 x 30%) 37,500
Business class tickets of family:
(P50,000 x 3 ) 150,000
Inland travel expenses for Jessie (in excess
of the $300 limit):
($550-300) x 5 days x P45 62,500
Inland travel expenses of family:
($450 x 5 days x P45) 112,500
Taxable monetary foreign travel benefits P362,500

3. Total Monetary Value of Foreign Travel Expenses:

Taxable foreign travel benefits P362,500
Non-taxable foreign travel benefits 162,500
Total monetary value P525,000

You may not under any circumstances, transmit, reproduce, distribute, display or lend, in whole or part, any of the contents provided in this document. Access to this
material is used solely as an educational tool for distance and remote learning and for the personal use only of students enrolled in BA 127 FS 2022-2023.