Special Treatment Of Fringe Benefits

FRINGE BENEFITS

Definition
Fringe benefits refer to all other benefits or incentives that an employee receives, apart
from their basic salary. These benefits can be in the form of goods, services, or other benefits
provided by the employer to the employee.

Tax treatment of fringe benefits

The tax treatment of fringe benefits depends on their nature.
● Fixed fringe benefits, like transportation allowance, are considered regular
compensation.
● Variable fringe benefits, such as commission and overtime pay, are considered
supplemental compensation.
● Incentives like 13th month pay fall under fringe benefits.
● Meanwhile, fringe benefits provided for the convenience or necessity of the
employer are exempt from income tax.

Other Fringe Benefits

Other fringe benefits not classified as compensation income and not exempted under the
law are treated differently for rank and file employees and managerial or supervisory
employees.
● Rank and file employees' other fringe benefits are included in "other benefits"
under "13th month pay and other benefits."
● However, managerial or supervisory employees' other fringe benefits that are not
considered compensation income are subject to final fringe benefit tax.

Scope of Fringe Benefits Tax

The scope of the fringe benefit tax only covers taxable fringe benefits of managerial or
supervisory employees, and excludes those items considered as compensation income. The
general categories of fringe benefits subject to final tax are management perquisite benefits,
employee personal expenses shouldered by the employer, and taxable de minimis benefits
exceeding their limits or not included in the de minimis list.

General Categories of Fringe Benefits subject to Final Tax

Management perquisite benefits are non-performance-based incentives given to a
special group of employees, and are considered fringe benefits subject to fringe benefit tax. The
distinction between fringe benefits and compensation income can sometimes be unclear, but
performance-based benefits are generally considered compensation income, while incentives or
perks are fringe benefits.
Management Perquisite Benefits
• Perquisite benefits, also called "management perks'' are highly privileged incentives given only
to a special group of employees.
• These benefits are non-performance based and are given as incentives to management
employees.
•Perquisite benefits are not considered as compensation income, but as fringe benefits subject
to fringe benefit tax.

The boundary between fringe benefit subject and compensation income subject to regular tax
sometimes overlaps. Based on past rulings, the BIR seemed to maintain the view that
performance-based benefits are compensation income while benefits in the nature of incentive
or perks are fringe benefits. As a safety net, it is therefore best recommended for taxpayers for
BIR rulings on the proper treatment of income in their compensation plans to avoid
inconvenience
Employee Personal Expenses
When an expense takes the nature of an employee personal expense or expenditure and is
paid or assumed by the employer in default of a proximate business necessity, it is a deemed a
fringe benefit in its entirely even if the expense is receipted in the name of the employer.

Hybrid Expenses
When the employer incurs expenses which is purported partly for business and partly for
employee's incentives, only 50% of the expense representing the employee incentives is
subject
to the fringe benefit tax.

The following are hybrid expenses under RR3-1998:

1. Housing Benefits in the form of rental accommodation. When an employer leases the a
residential unit for the use of the employee and the business, the rental expense is deemed half
business expense and half fringe benefit to the employee.

2. Allowing the employee free use the business property. When the employer allows its
employee to use business properties, the rental value or
depreciation value of the business property over the period of usage is deemed half business
expense and half fringe benefit to the employee.

Exempt fringe benefits

The following fringe benefits are exempt from the fringe benefit tax:
1. Fringe benefits which are authorized and exempted from tax under special
Laws
Examples: Employer's contribution to SSS. PhilHealth. HDMF or group insurance,
except excess over the mandatory amounts set by law
Benefits required by the nature of, or necessary to the trade. business or
profession of the employer
3.Benefit given for the convenience or advantage of the employer
4.Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefit plans
5. Benefit given to rank and file employees whether or not granted under a
collective bargaining agreement
Any personnel who do not possess management or supervisory positions are referred to as
"RANK AND FILE EMPLOYEES."

The taxable fringe benefits of rank and file employees are exempt from fringe
benefit tax, but are subject to regular income tax as part of compensation income.

De minimis (small value) benefits within their legal limits

Examples:
1. 10 days monetized unused vacation leave credits;
2. Medical cash allowance to dependents of employees not exceeding P750 per semester or
P125 per month;
3. rice subsidy of P1,000.00 or one-sack of rice per month;
uniforms and clothing allowance not exceeding P3,000.00 per year;

"Necessity or convenience of the employer” rule

If an expense is necessitated by the nature of the trade, business, or profession of
the employer, or is furnished principally for the employers convenience or
advantage, it is an ordinary business expense. The personal advantage of the
employee is merely incidental to the These fringe benefits are not viewed
as taxable fringe benefits under the NIRC.

Examples Of exempt benefits under this rule:

1. Scholarship program for an employee to study and acquire competence for future
use of the business
2.Car incentives to medical doctors so they will available for duty anytime
Free transportation services to employees working at distant facilities
4. Mobile phone allowance to secretaries who are to handle off duty client inquiries
5. Sleeping quarters to field engineers and staffs working on remote facilities
6.Helicopters assigned to fishing employees for locating schools of fish offshore or
to mining engineers for mineral exploration purposes
7. Personal aircraft to a chief executive officer managing business affiliates
subsidiaries spread across different countries
8. Car incentive to a travelling company salesman
9. Sleeping quarters near the camp furnished to military personnel so they be
available for duty at any time of insurgency
10. Housing units for an employee and his family near the employer's place
business to ensure the employee's availability anytime when the employer

THE FRINGE BENEFIT TAX

The fringe benefit tax is a final tax imposed on the fringe benefit furnished, granted
or paid by the employer to the employee, except rank and file employees, whether
such employer is an individual, a professional partnership or a corporation,
regardless of whether the corporation is taxable or not, or the government and its
instrumentalities.

Any personnel who do not possess management or supervisory positions are referred to as
"RANK AND FILE EMPLOYEES."

Who are considered as managers? Supervisors? Rank and file?

A: "Managerial employees" refers to those who are given powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees,

"Supervisory employees" are those who 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 judgement.

"Rank and file employees" means all employees who are holding neither managerial nor
supervisory position.

What is Fringe Benefit Tax (FBT)?

The term "fringe benefit tax" (FBT) refers to a type of tax that businesses paid in exchange of
benefits they provided to their employees.

For the purposes of the fringe benefit tax, fringe benefit means any good, service.
or other benefits furnished or granted in cash or in kind by the employer
individual employees (except rank and file employees) such as, but not limited
the following:

1. Housing benefits
2. Expense account
3. Vehicles of any kind
4. Household personnel, such as maid, driver or others
5. Interest, for the difference between the market rate (12%) and the actual
interest granted
6. Membership fees, dues and other expenses borne by the employer for the
employee in social and athletic clubs or other similar organizations
7. Expense for foreign travel
8. Holiday and vacation expenses
9. Educational assistance to the employee or his dependents
10. Life or health and other non-life insurance premiums or similar account'
in excess of what the law allows

CHARACTERISTICS OF THE FRINGE BENEFIT TAX

1. Final tax

the fringe benefit tax Is a final tax which is withheld by the employer at the source. Thus, the employee
need not report the fringe benefits in his income tax return.

2. Tax upon the fringe benefits of managerial or supervisory employees

*The fringe benefit tax is not a tax to a employer, it is a tax upon a fringe benefit realized by the
managerial or supervisory employee, it is a tax to the employee ; hence it applies regardless of the
identity of the employer , therefore it applies even if the employer is a sole proprietor partnership
corporation whether taxable or exempt or the government.
3.Paid by the employer
*As a final tax the tax is presumed withheld at source and remitted by the employer to the government
4.Grossed-up tax
*The monetary value or the amount of fringe benefit realized or taken home by the employee is
effectively net of the final tax which is to be withheld at source hence the monetary value is first
grossed-up by the complement percentage of the applicable fringe benefit tax rate before the fringe
benefit tax rate is applied.
5.Due quarterly
*The fringe benefit tax is due for remittance quarterly based on the accounting period(fiscal or
calendar) selected by the employer. The monetary value of each taxable fringe benefit is determined and
reported quarterly through BIR form 1603Q.

The quarterly fringe benefit tax is due on or before the last day of the month following the quarter in
which withholding was made.
Procedures in Computing the Fringe Benefits Tax
1. Determine the monetary value
*Monetary value refers to the taxable amount of benefits taken home or realized by the managerial or
supervisory employee. The monetary value is presume net of the final tax.
2. Determine the gross-up rate and fringe benefit tax rate applicable for the taxpayer
*The gross up rate is the complement of the fringe benefit tax rate. If the fringe benefit tax rate is 35%
the gross-up rate iss (100% less 35%)or 65% if the fringe benefit tax rate is 25% the gross-up rate is 75%
3.Determine the grossed-up monetary value by dividing the monetary value by the gross-up rate.
4.Determine the fringe benefit tax by multiplying the fringe benefit tax rate to the grossed-up
monetary value.

RULES ON VALUATION OF FRINGE BENEFITS

1. Benefits paid in cash
When benefit is given in cash or paid for in cash. The monetary value is the amount paid for cash.
NOTE: the only exception here is when the employer pays for the rent of the residence of the
employee. Monetary value is 50%of the rental payment
2.Benefits paid in kind
When benefit is given in kind the monetary value us the fair value of the thing given unless its book
value is higher book value is the cost less any provision for depreciation for depreciable properties.
Simply stated the monetary value is the fair value or the book value of the thing given whichever is
higher.
When ownership over the property is transferred to the employee, the monetary value is the entire fair
value of the property even if the property is partially used in the business of the employer.
3. Benefits that are furnished
When the benefit is given in the form of free use of the employer’s property the monetary value is
50% of the rental value of the property if the property has no available rental value the depreciation
value is used.

For purposes of the depreciation value the presumptive useful lives of the property are:
A. 20 years for real properties.
Hence, the depreciation value is computed as 1/20 or 5% of the value of the property.
B. 5 years for movable properties.
Hence the depreciation value is computed as 1/5 or 20% of the value of the property.

Since the fringe benefit tax is paid. Quarterly the valuation and reporting of monetary value is also done
quarterly . in case of use employer properties the reporting of monetary value ceases from the month
the free use is discontinued.

Illustration: Determination of depreciation value

A partnership transferred the use of a property with a fair value of P2,000,000 to its supervisor.

The annual depreciation value shall be:

1. If the property is an immovable such as a residential unit the annual depreciation value shall be
P100,000 computed as P2,000,000 x 5%
2, If the property is movable such as car or other motor vehicles the annual depreciation value shall be
P400,000 computed as P2,000,000 x20%

In quarterly reporting for the fringe benefit tax the quarterly monetary value is determined by dividing
the annual value by 4.

SPECIAL GUIDELINES ON MONETARY VALUE DETERMINATION

Taxable Housing Benefits

1 . Employer leases a residential property for the use of his employee and the said property is
the usual residence of the employee.
Monetary value = 50% of the benefit

Illustration
A sole proprietorship business leases a residential house and lot for the use of his business
manager for P20,000/month.

The monetary value shall be:

Quarterly value = (P20,000 x 3 months) = P 60,000
Quarterly monetary value = P 60,000 x 50% = P 30.000

2. Employer owns a residential property and assigns the same for the use of his employee as
his usual place of residence; the annual value of the benefit is 5% of whichever is higher of the
zonal or assessed value of the land and improvement.
Monetary value = 50% of the annual value of the benefit

Illustration
Chamberly, Inc. allowed one of its unused realty investment costing P3,500,000 with zonal
value of P4,000,000 and assessed value of P3,000,000 to be used by its vice president.

The monetary value shall be determined as follows:

Annual depreciation value = P4,000,000 x 5%. P 200,000
Quarterly value = P200,000/4 quarters. P 50,000
Quarterly monetary value = P50,000 x 50% P 25.000

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 is 5% or 1/20 of the acquisition
cost, exclusive of interest.
Monetary value = 50% of the annual value of the benefit.
This is the same with No. 2 except that the basis is the purchase price of the property.
Illustration
Cotabato Corporation purchased a residential property for the use of its manager. The property
is payable over 11 annual installments of P200,000 including interests but have a cash price of
P2,000,000. For accounting purposes, Cotabato Corporation opted to capitalize the interest and
recorded the P2,200,000 contract price as acquisition cost of the property.

The monetary value shall be determined as follows:

Annual depreciation value = P2,000,000 x 5% P 100,000
Quarterly value = P100,000/4 quarters. P 25,000
Quarterly monetary value = P25,000 x 50% P 12.500
Note: The purchase price is the cost net of interest.

Purchase by the employer of residential property and transfer of ownership in the other name of
the employee, the value of the benefit is whichever is higher of the acquisition cost or zonal
value
Monetary value = 100% of the value of the benefit

Illustration
A non-profit corporation bought a residential dwelling for P5,000,000 and transferred ownership
to its president. The property has P3,000,000 zonal value.

Since there is transfer of ownership, the monetary value is the entire P5,000,000 the higher of
book value (i.e. cost in this case) and zonal value.
Purchase by employer of property and transfer of title to employee for less than adequate
consideration, the value is [(fair market value or zonal value, whichever is higher) less
consideration paid by employee
Monetary value = 100% of the value of the benefit
Illustration
Denzy, a professional practitioner, transferred his residential property in the name of his
managerial employee for P2,000,000. The property has fair value per tax declaration of
P3,400,000 and P5,000,000 zonal value.
Since there is a transfer of ownership (L.e. title), the monetary value is P3,000,000 computed as
P5,000,000 fair value less the P2,000,000 consideration paid.

Exempt housing privileges:

Military officials of the Armed Forces of the Philippines (AFP). Philippine Alt Force (PAF),
Philippine Army, and Philippine Navy on their quarters which are within or accessible from the
military camp so they can be readily available on call to meet the exigencies of their military
service. 2. Housing unit situated or adjacent to the premises of a business or factory (within a
maximum of 50 meters) from the perimeter of the business premises.

The 50-meter rule may be relaxed when upon the basis of health or safe requirements such as
in the case of chemical manufacturing, the housing needs to be located at a farther location.

Temporary housing for an employee in a housing unit for 3 months or less (i.e not exceeding
one quarter)

Expense Account
Expenses incurred by an employee but which are paid by his employer or incurred and paid by
employee but reimbursed or advanced by the employer are taxable fringe benefits. The
monetary value is the amount paid by the employer.

Properly documented employer expense

When the expense is receipted for and in the name of the employer and the penditure does not
partake of the nature of a personal expense attributable to the employee, it is not a taxable
fringe benefit because it is a business expense.

Personal expenses of the employee such as groceries for the personal consumption of be
employee and/or his family, if paid or reimbursed by the employer, are taxable fringe benefits
whether or not receipted in the name of the employer.
Fixed and regular RATA are treated as part of regular compensation income and are subject to
creditable withholding taxes, not to fringe benefit tax.

Illustration
Denver Corporation paid for the following expenses which were liquidated by its managerial
employee:

Water and electricity bill at manager’s home P 15,000

Meals and groceries at manager’s home 18,000
Bill on business telephone 2,000
Bill on personal phone 1,000
Transportation from office to and from clients. 12,000
Transportation from office to and from manager’s home 10,000
Foods and beverages for visiting business clients 8,000

The monetary value of fringe benefits shall be computed as follows:

Water and electricity bill at director’s home P 15,000
Meals and groceries at director’s home 18,000
Bill on personal phone 1,000
Transportation from office to and from home 10,000
Total monetary value P 44.000

Note: Business telephone bills, office to client transportation and food and beverages for client
visitors are business expenses, not fringe benefits to the manager.

Motor Vehicles of Any Kind

Purchase by employer of motor vehicle in the name of the employee regardless of whether the
same is used partially in the business of the employer
Monetary value = 100% of the cost of the motor vehicle
Note that the monetary value shall be reported in the quarter of purchase.

Cash benefit to employee for the purchase of a vehicle, even if the vehicle is partly used in the
business of the employer
Monetary value = 100% of the cash benefit, except when the amount is subject to
withholding tax on compensation

Car benefits that are paid in cash and are subjected to withholding tax on compensation are
subject to regular tax, not to fringe benefit tax. If subject to fringe benefit tax, the monetary value
shall be reported in the quarter of payment.
 Purchase of car on installment basis by the employer with ownership placed in the name of the
employee even if the car is used partly for the employer’s business the benefit is the acquisition
cost divided by 5 years
Monetary value = (1/5) or 20% of the acquisition cost

Illustration
An employer purchased a car for P1,000,000 payable in four installments plus 10% interest on
the outstanding unpaid balance of the car.

The entire acquisition cost shall be recognized as monetary value since there is transfer of
ownership but the regulation requires amortization over 5 years. Hence, the employer shall
recognize P1,000,000/5 or P200,000 monetary value annually for five years. For every quarter,
the employer shall report P200,000/4 or P50,000 monetary value until the cost is fully reported
over 5 years.

Employer shoulders a portion and is placed in the name of the employee, even if partially used
in business

Monetary value = the portion shouldered by the employer

Illustration
An employer assisted its managerial employee in purchasing a brand-new car for P4,000,000;
60% of the value is deductible against future salaries of the managerial employee.
The monetary value shall be P1,600,000 computed as P4,000,000 x 40% representing the
portion shouldered by the employer. This will be reported in the quarter the employer’s share is
paid.

Fleet of motor vehicles owned for the use of the business and the employees, the value of
benefit is the cost of all motor vehicles not used for sales, freight, delivery service, and other
non-personal uses divided by 5 years.
Monetary value = 50% of the value of benefit

It should be noted that the cost of motor vehicles not used in business is amortized over 5
years. There being no transfer of title, 50% of the benefit is recognizable as monetary value.
The quarterly recognition of monetary continues until the free usage is terminated.

It must be noted that because of the inherent difficulty of tracing the realization of the fringe
benefits to a particular employee considering the collective enjoyment of the benefit by the
employees (managerial, supervisory, or possibly including rank and file alike), the regulations
simply subjected it to the final fringe benefit tax.
Fleet of motor vehicles leased for the use of the business and the employee, the value of the
benefits is the rental payments for motor vehicles not normally used for sales, freight, delivery,
service, and other non-personal use
Monetary value = 50% of the value of the benefit

Aircrafts including helicopters are deemed solely for business use; hence, they are not subject
to fringe benefit tax.
Yachts whether owned and maintained or leased by the employer are presumed not for
business use; hence, taxable as fringe benefits. If owned or maintained, the value of the benefit
is measured as the depreciation value over 20 years.

Illustration
Assume a corporation acquired a P10,000,000 yacht for the use of its executives.

The monetary value shall be determined as:

Annual depreciation value = P10,000,000/20 P 500,000
Quarterly monetary value = P500,000/4 P 125.000

A yacht is considered immovable by virtue of the fact that it is fixed and cannot be removed from
water. Hence, the 20-year presumptive useful life for real properties is used. If this is leased, the
entire rental payment is the monetary value. Note that the 50% rule is not applied by the
regulation.

Supposing the yacht is purchased and transferred to the name of the executive, the monetary
value shall be the entire P10,000,000.

Note on aircrafts and yachts

The high cost of ownership of aircrafts makes it inherently prohibitive or impractical to be for
personal use. Thus, aircrafts are deemed by the regulations as solely for business use; hence,
they are exempt from fringe benefit tax. Yachts, though pricey on the other hand, generally lack
any sensible business purpose aside from being for personal pleasure; hence, its depreciation
value is subject to fringe benefit tax in full.
Exceptionally, if the yacht is used solely for the entertainment of guests or prospective clients, it
is not subject to the fringe benefit tax. In this case, the depreciation of the yacht qualifies as
“entertainment, amusement, and recreation expense”

house hold expenses

Employee expenses borne by the employer for household personnel, salaries of household
help, personal driver of the employee, and other personal expenses such as homeowners
association dues, garbage dues, electricity, and water are taxable fringe benefits. The
monetary value is the amount paid
Expenses for the family members of the employee shouldered by the employer are taxable
fringe benefits in full.

Interest on Loan at Less than Market Rate The interest forgone by the employer representing
the difference between 12% and the actual interest charged is a taxable fringe benefit.
illustration
EUROPA Cooperative lent its chief executive officer P1,000,000 at a minimal 3% interest rate.
The monetary value shall be computed as follows:
Annual monetary value = (12% - 3%) x P1,000,000 P90,000
Quarterly monetary values =P 90,000/4 P22,500
Membership fees, dues, and other expenses borne by the employer for his employees in social
and athletic clubs or other similar organizations constitute taxable fringe benefits. The monetary
value is the amount paid. Interest on a loan at less than the market rate (currently set at 12%) to
the extent of the difference between the market rate and the actual rate granted. Membership
fees, dues, and other expenses borne by the employer for the employee in social and athletic
clubs and similar organization.

Expenses for Foreign Travel Reasonable business expenses for foreign travel for attending
business meetings and conventions are exempt, such as the following:
1. Inland travel expenses such as food, beverage and local transportation costs
2. Lodging costs in hotel or similar establishment amounting to an average of $300/day or less.
3. Economy and business class airplane tickets
4. 70% of the cost of first-class ticket
Note that 30% of the cost of first-class ticket in foreign travels is considered de minimis. Note
also that the foregoing rules apply only on foreign travels. The cost of domestic travel is
generally considered as reasonable and hence deductible.

Substantiation of Requirements
>It is the needs to be the proof or evidence that the funds were only used for eligible medical
expenses.
>The above rules apply if the expenses were supported by documentations proving the actual
occurrences of the meeting or convention; otherwise, they shall be subject to fringe benefit tax.
Holiday and Vacation Expenses
> Holiday and vacation expenses are taxable fringe benefits if shouldered by the employer.
>The monetary value is the amount paid or shouldered by the employer.
>The amount in the account is updated at the end of each reporting period to reflect the
additional expense generated as a result of employee time worked during the period.

Educational Assistance to the Employee or his Dependents

>An educational assistance program is an employee benefit in which an employer pays for an
employee's educational expenses, provides tuition reductions or scholarship grants to an
employee's spouse or dependent children or offers student loan repayment assistance.
>is generally taxable except when it is incurred for the convenience or furtherance of the
employer's business, such as: 375.

Life or health insurance and other non-life insurance premiums or similar amounts in
excess of what the law allow?
1. Employee’s share in the Life Insurance and Retirement Contribution of Regular members is
9% of their Basic Salary while the Employer’s share is 12 % of the same. This is mandated
under section 5 of RA 8291 or the GSIS Charter.
2. Insurance equates to the money that is paid by any person or company/business for availing
of an insurance policy. Income insurance premium amount is influenced by multiple factors and
varies from one payee to another. average group health insurance policy totaled $7,470 a year
for single coverage in 2020. On average, employers paid 83 percent of the premium, or $6,227
a year. Employees paid the remaining 17 percent, or $1,243 a year.
Tax treatment of the total fringe benefits expenses?
The total fringe benefits expenses including the he fringe benefits that expenses is a deductions
expense of the employee against his gross incomes in the computation of his taxable income. It
must be noted that a deductible fringe benefits that that a expenses exist only when the
benefits is paid in cash or in kind.
Accounting entries?
1. Taxable benefits paid for in cash or in kind
Fringe benefits expenses:. XX
Fringe benefits tax expenses:. XX
Cash tax basis of property XX
Fringe benefits tax:. XX

Illustration I: Rental recommendations

Plato corporation paid 91,000 for the rental of a housing unit for the use of its president Fringe
benefits expenses 91,000
Fringe benefits tax payable. 24,500
Cash 91,000
Fringe benefits tax payable. 24,500

Illustration II: transfer ownership over properties

Aristotle company transfer ownership over a newly acquired investment property costing
1,200,000 as residence of its supervisor employee has a zonal value 1,300,000
Fringe benefits tax expenses 1,300,000
Fringe benefits tax expenses 700,000
Investment property. 1,300,000
Fringe benefits tax payable. 700,000

2. Benefits which do not involve payments of cash or properties?

Fringe benefits expenses. XX
Fringe benefits tax payable. XX

Illustration: Free usage of assets

Homer realty designed a unit of its condominium properly for the use of its vice president for
finance as his family resident the rental value of the unit for the past calendar quarter would
have been 260,000
Fringe benefits expenses 70,000
Fringe benefits tax payable 70,000

Illustration: interest free loans

Petrodrill an oil exploration company granted a 1,000,000 interest loan to a non residents
managerial employee
Fringe benefits expenses 10,000
Fringe benefits tax payable. 10,000

3. Exempt benefits paid in cash or in kind

Fringe benefits expenses. XX
Cash/property. XX

Illustration: exempt fringe benefits

An employee paid 120,00 for the tuition fee of his supervisor who is taking an advancement
course in furtherance of the employee business
Fringe benefits expenses. 120,000
Cash. 120,000
4. Exempt benefits which do not involve payments of cash or transfer of property Illustration:
Exempt free use of property
Phillip allowing its plant manager to use a residential property nearby its processing plant to
ensure the manager close monitoring of the production processes the rental value of the
properties is 40,000
Illustration: 1
Highland miners marketing cooperation HMMC furnished its managerial employee a car when
HMMC will purchase cars of their cars worth 1,300,000 40% of the purchase price will be
deducted against future salaries of the employee HMMC purchased a car for its sales manager

Advances of officers 520,000

Fringe benefits expenses. 700.200
Cash 1,300,000
Fringe benefits tax payable 420,000