FRINGE BENEFIT TAX

EXERCISE 6-2. TRUE OR FALSE QUESTIONS

1. Fringe benefit expense plus fringe benefit tax expense is equal to grossed-up monetary
value.

TRUE

2. All fringe benefits which are not subject to fringe benefits tax are subject to ordinary income

tax. TRUE

3. All fringe benefits which are of relatively small value are included in the term de minimis
benefit

and are exempt from fringe benefit tax and ordinary income tax. FALSE

4. Under the convenience-of-the-employer rule, a fringe benefit received by an employee is

exempt from ordinary income tax but it is subject to fringe benefits tax. FALSE

5. Garbage dues on the household of a manager amounting to P400 per month is subject to
fringe

benefit tax if shouldered by the employer. TRUE

6. The excess on the ceiling of P1.500 of rice allowance shall automatically be added to the
taxable

compensation income of a rank-and-file employee. FALSE

7. A housing privilege of a police regional director within the compound of the regional police

office is exempt from the payment of a fringe benefit tax. TRUE

8. Allowances which are fixed in amount and are regularly being received every month by a

managerial employee are fringe benefits which are subject to fringe benefit tax. FALSE
9. Allowances which are fixed in amount and are regularly being received every month by a

supervisory employee are benefits which are included in the computation of the gross

compensation income. TRUE

10. Representation allowances and travel allowances (RATA) of government officials are
privileges

which are taxable as compensation income.

11. The fringe benefit tax is a final withholding tax on the employee which are being withheld
and

paid by the employer. TRUE

12. The fringe benefit tax is a final withholding tax with a rate of 35% based on the monetary
value

of the fringe benefit. FALSE

13. A fringe benefit received by an employee is subject to fringe benefits tax even if the
employer-

grantor is exempt from income tax. FALSE

14. If the grant of the fringe benefit to the employee is required by the nature of or necessary to
the

business of the employer, it shall not be subject to fringe benefit tax even if the recipient is a

managerial/supervisory employee. TRUE

15. 15. An exemption from fringe benefit tax does not follow exemption from a creditable

withholding tax. TRUE

16. In recording the transaction for a cash fringe benefit given to a supervisory employee, the
entry
is: (Debit) Fringe Benefit Expense (Debit) Fringe Benefit Tax Expense (Credit) Cash (Credit)
Fringe

Benefit Tax Payable.

17. In recording the transaction for a cash fringe benefit given to a rank-and-file employee, the
entry

is: (Debit) Fringe Benefit Tax Expense (Credit) Cash.

18. Membership dues of a manager in Rotary Club which is shouldered by his employer is a
taxable

fringe benefit. TRUE

19. The monetized value of vacation and sick leave credits paid t government officials and

employees is not subject to any ceiling. TRUE

20. Employer's share in the monthly contribution to the Social Security System (SSS) of a
supervisory

employee is a fringe benefit which is not subject to fringe benefit tax. TRUE

EXCLUSIONS FROM GROSS INCOME

EXERCISE 7-1. TRUE OR FALSE QUESTIONS

1. The cash prize received by Nick Joaquin as Ramon Magsaysay Awardee (Literary Writing

Category) is not subject to income tax.

2. The cash prize received by Manny Pacquiao in a boxing fight against El Dinamita Marquez
is

exempt from income tax.

3. The exemption of P90,000 Other Benefits maybe increased to P100,000 by the Secretary of

Finance without the need of a legislation by the Congress of the Philippines.

4. The exemption from income tax of premiums paid to the Social Security System refers to the

entire amount withheld by the employer and remitted to the Bureau of Internal Revenue even if

it is more than the amount required by law.

5. The employer's share in the premium payments to the Philhealth is not part of the
exclusions

from the gross income of the employee.

6. All income received by a senior citizen are exempt from income tax.
7. A minimum wage earner in Metro Manila may not be a minimum wage earner in Region X.

8. A minimum wage earner is not only tax exempt on his basic salary but also on holiday pay,

overtime pay and night shift differential pay.

9. A minimum wage earner who is also earing a self-employment income is exempt from
income

tax on the entire income.

10. Portion of the hospital bills which was shouldered by the Philhealth is not a taxable income
of

the taxpayer patient.

11. Proceeds of life insurance which are payable to the beneficiary upon the maturity of the
policy

are not subject to income tax.

12. If the insured outlived the life insurance policy, the proceeds shall be tatrable to the
beneficiary

less the total amount of premiums paid to the insurer