..

erJ ·
Fringe Benefit Tax

Prior to the enacti:n~nt of the comprehensive tax reform program

popularly known as the Nationa·1 Internal Revenue Code (NIRC), the only
forms ~f e~ployee income that were effectively taxed were· those which
were given in cash. This was because an income tax was automatically
withheld and collecteq at source . by the government. Additional ·
compensation which was given in the forms of perks and other non-cash
benefits were virtually untaxed, giving rise to inequity in the distribution of
the tax burden. The provision of salaries in the form of untaxed perks
became a .popular means of tax avoidance. ·Hence, the Fringe Benefit
Tax (FBT) -was proposed to enhance the progressivity of the income tax
and to broaden the tax base.

Definition of a Fringe Benefi.t and Fringe Benefit Tax

The term "compensation" under Section 2. 78.1 (A) of RR 2-98, as

_amended, means all remuneration for services performed by an employee
for his employer under an employer-employee relationship, unless
specifically excluded by the Code. The name by which the remuneration
for services is designated is immaterial. Thus, salaries, wages,
emoluments and honoraria, allow~nces, commissions (i.e. transportation ,
representation, entertainment and the like), fees including director's fees,
if the director is, at the same time, an employee of . the
employer/corporation; taxable bonuses· and fringe benefits except those
which are subject to the fringe benefits tax under Section 33 of the Code-
taxable pensions and retirement pay; and other income of a similar natur,e
constitute compensation income.

Fringe benefit is defined under Section 2(f) of RR 8-2018 as any

goods, service or other benefits furnished or granted by an employer .in
cash or in kind, other than the basic compensation, by an employer to an •
individual employee (except rank-and-file employee as d fined in Sec.
3(m) of RR 8-2019). In short, it ·is a form of pay which may be in lhe form
of property, services, cash or cash equival nt to supplement a stated pay

149
 i h-!:f & B~ ~
for the performance of services. Under the ta~ code, fri~ge ~enefits
subject to fringe benefit tax cover onJy those fnnge benefits g_Iven or
furnished to a managerial or supervisory employee. The reg~lat1?ns do
not cover those benefits which are part of taxable compensation income
becaus·e· such incomes are subject to withh_olding tax on compensation in
accordance with RR No.2-98, as amended. The tax treatment of fring.e
benefits given to employees is shown in Table 3-1 below:

Table 3-1: Tax Treat'!lent of Fringe Benefits

~
· Fnnge Benefits ·Part of *Taxable ' Subject to Basic Tax a~d Sutiject
: aiven to: Compensation CWT on compensation to FBT
• Rank &File
~ Yes Yes No
■ Supervisory/ , No** No Yes
ManaQerial ,

*Taxable compensation income in the table refers to salaries/wages presented in the Income Tax
Return of an individual taxpayer.
HFBs given to. supewisory and· managerial employees are taxable, -nonetheless, it is subject to
fringe benefit tax a final withholding tax, not the graduated tax rate for compensation income.

The Labor Code· distinguishes a rank-and-file employee from a

managerial employee. It-provides that a managerial employee is one who · 1
js vested with powers of prerogatives to lay down and execute
.management policies and/or to hire, transfer, suspend, . lay-off, recall
discharge', assign or discipline employees, or to effectively recommend
such managerial actions. All employees not falling w~thin this definition
are considered rank-and-file _employees. Section 3(m) of RR 8-2018
defines rank and -file employee as an employee holding neither
managerial nor supervisory position.

Nature of a Fringe Benefit Tax

Fringe Benefit Tax (FBT) is a monetary burden imposed by the
sovereignty on _any good, ·service, or other benefit fur,:,ished or granted by
-~n . ~mployer, m cash or in kind, in . addition to basic salaries, to an
md1v1dual employee, other ·than a ra~k-and-file employee.

The FBT is a final tax imposed on the employee withheld by thl1

empl~Y_er,- c?mputed at 35% {beginning ·January 1, 2018 or upon the
effect!vity of TRAIN Law) on the grossed-up monetary value (GUMV) of
t.he fnng~ benefit ·gra.nted by ~~e employer to an employee who ho:lds a
man~genal or supervisory posItIon. Being a final tax, the FBT is collected
or. withheld at source by f.he employer, meaning, at the firm's ;level rath . r

150
than at the taxpayer's I I t .. ·
h:Je, 73_~
= 7
Tnt
valuation of benefits is ev~. 9 facillta~~ ~ax administration. For one,
allocating benefits amo e~s1~r. at th~ firm ~ _level ~nd the problem of
Revenue (BIR) has . I ng in_d1v1du.al~ is avoided . The Bureau of Internal
_ . a so to contend with fewer corporate tax returns.
· FBT is eff r ,· · . ·
. d" .d f ec ive _ regardless · of whether the employer is an
m IvI ua I pro essional p rt · h' .
' . .. , a ners Ip or a corporation (regardless of whether .
the corporation _is taxable or not), the government or its instrumentalities.
~BT shall _be withhel~ and rerrJitted by the employer to the BIR (thus, the
employer is t~e one /Jable to pay the FBT) not later than the last day of the
month following the _close of. the quarter during which withholding was
-made (TRAIN Law; RR 11-2'018).

Items of Fringe B.enefits subject to·Tax

Unless_ exempt, the following items of fringe benefits received by a
supervisory or m~riagerial employee shall be subject to fringe benefit tax:
· . 1) Housing . · . ·
2) Expense account
3) Vehicle of any kind
4) Household personneJ, such as maid, driver an·d others
, 5) Interest on loan at less than market rate to the extent of the
difference between the market rate and actual rate granted
6) Membership fees, dues and other expenses borne by the
employer for the employee in social and athletic·clubs and similar
organizations
7) .Expenses for foreign travel
8) Holiday and vacation expenses
9) Educational assistance-to the employee or his depentjents.
1O) Life or health 'in_surance and other non-life insurance premiums or
similar amounts in excess of what the law allows_.

-. ILLUSTRATION 1: C<?vere~ Employees

Ana was hired by Earl to be the latter's secretary. and personal assistant. To
enable her to perform her .duties well! Earl provi'9ed a condo unit (adjacent to
the office) which Ana coul_
d use a~ her t~mpo~ary residence. Is the fair market
value of the use of the condo by Ana a ''fringe benefit" that is subject to fringe
\ benefit tax imposed under Section 33 of the National Internal Revenue Code?
❖ Answer: ,No. ~
Ana is neither a managerial nor a supervisory employee. Only fringe benefits
. granted to mana!}erial or supervisory employees are subject to the fringe
benefits tax.

151
Tax Exempt •Fringe Benefits'
1

The following fringe benefits shail not be subject to basic tax or fringe
benefit tax: .
1) Fringe benefits Which are authorized and exempted from income
tax under any special law such as:
■ Contributions required under SSS law
■ . Contributions required under GS.IS law -
■ · Similar contributions under an existing ·1aw
■ Premiums for group insurance of e·m ployees

2) If .the grant of fringe benefits to the employee is requir~d by the

nature of, or necessary to the ·trade, bu$iness or profession of the
e_
mployer.

ILLUSTRATION_2:
"Outstation Allowance (covers meals and trip-related expenses) " are granted to
·the managerial and supervi_ sory ~mployees of Philippine Gaming Management
· Corporation (PGMC) who will be away from.the office site for at least a·hours to .
.visit lotto franchise Holders for repairs and/or inspection of equipment leased by
PGMC from Philippine Charity Sweepstakes Office (PCSO). Should the
af~rementioned allowance be subjected to tax?

❖ . Answer: No
The allow~nce is required by the nature of or necessary to the trade or
business of P.GMC, hence, not subject to the fringe benefits tax prescribed in
/. Section 33(A) of the Tax Code. Consequently, it is not subject to Income Tax
and to withholding tax.. By the ~ame token, the aforestated allowance which
may pe incurred or expected to be 'incurred by the managerial and
supe,visory employees in the performance of ·their duties cannot be
considered as ,part o( compensation subject to withholding tax even if the
employees fail to account/liquidate the same considering that said
expenses are pre-9omputed on a daily basis and are paid to employees while
on an assi nment or dut BIR Ru/in No. 013-2002 dated A ril 5, 2002 .
)

3) De minimis benefits (refer to page 157)

J '

4) If th e ~rant of benefits is for the convenience or advantag,e of the

.employer. ·

152 ·
 IL~USTRATION 3:

CASE_ A. Use the same data.,in lllustratio~ # 1 . ,

. Question 1: . . •·
Is the.fair market value 0f th · . ··
• 11 ,. • • e use of the cqndo urnt by Ana a "compensation
.

income th at 18 subJect to basic 'tax under Section 24A of the Tax Code and
c~ns~quently to-creditable withh~lding tax on compensation income?
••• Answer: No.
The cond? unit is provided for the convenience of the employer. hence does
not constitute a.taxable fringe benefit. Being his personal secretary, it is
necessary for Ana to be accessible to Earl anytime. ·
./

Question 2: ·
Assu·ming Ana .is a· managerial or supervisory empl~yee~ is the fair market
value of the use -~f the condo by Ana a "fringe benefit" subject to FBT?
❖ Answer: No. ·· · ·
As explained in question #1, if the grant of benefits is for the convenience or
advantage of the employer,. irrespective of the·employee's rank, the benefit
shall not be subject to fringe benefit tax and basic tax on compensatfon
income.
-
CASE B: .
·Arthur Henderson and Marie Henderson filed their annual income tax with the
- BIR. Arthur is president of American International Underwriters for the -
Phii'ippines, Inc., which is a domestic corporation engaged in the business of
general no,n-life · insurance, and represents a group of American i~surance
compan1es engaged in ·the business of general non-life i~surance.
The BIR demanded payment for alleged deficiency taxes. In their computation,
the BIR included as part of taxable income: -
■ · Arthur's allowances for rental, residential expenses, subsistence, water,
electricity and telephone expenses
■ Entrahce fee to the Marikina Gun and Country Club which was paid by his
employer for his account, and
■ Travelling allowance of his wife

The taxpayer's justifications _are as fa.Ila;~~: · . : '. . ·

■ As to allowance~ for
rental and ut1llt1es, Arthur did not receive money for
the allowances. Instead, the apartment' is furnished and paid for by h~s
employer-corporation (the mother company of American International), for
the employer corporation's purpos~s. The spouses·had no .choic~ but !o .
live in the expensive apartment, since the company used 1t to entertain
uests, to accommodate officials, and to entertain customers.

153
 t .

■ The entrance fee s·h9uld not be considered income since it is_an expense
of his employer, and m~mbership ,therein is merely incidental to his duties
.of increasing and sustaining the business of his ,employer. · · ·,
■ His wife merely ·accompanied_him to New York on a business ~rip as his
: secretary, and ·at·the employer-corporation's reque~t, for the wife to look
· ·- at · details of the plans of a building that his employer intended to
, construct. Such ·must nofbe-·considered taxable income.
I

Ruling: ' - .
The Supreme_Court ruled thc1t the claims are not part of taxable income
beqause no part of the allowanc~s in question redounded to their personal
·benefit, nor were such amounts retained by them. The bills were paid
directly by the employer-corporation to the creditors. The rental expenses
and subsistence allowf!nces are to be considered not subject to income tax.
The taxpayer's high executive position and social standing, demanded and
compelled the couple ·to live in a more spacious and expensive quarters.
Such "supsistenc~ allowance" was ·a·separate account from the account for
salaries and wages of employee$. The company did not charge rentals as
deductible from the salaries of the employees. . These expenses are
. company expenses, not income by employees which are subject to tax
Collector vs Henderson . ·

. Comput~tion of Fringe Benefit Tax

~ • • ' I

· In. general,_fringe benefit tax _r~te is 35% (beginning January 1,

. 2018 'Or_upon the effectivity' of TRAIN ~~w). However, FBT rate for
nonresident- alien_ not-engaged~ in . trade or business is 25%. The
computc;1tio,n of th~ fringe b~nef1ts tax is done by:

,1) 'Evaluating ttie value-.of the benefit granted or determining the

monetary value. , I • - , • • •

.?) Qetermi~ing the proportion or percentage (gross n,onetary factor) ,of

the -benefit which •is subject to the FBT. . · · .
3) .· ~~~e:m!nlng ·the .grossed-up monetary value of:the fringe benefit by
d1v1d_
mg the monetaryl ·value of the fringe benefit by the gross
monetary valu.e factor; and
4) Multiplying the grossed-up monetary v~lue factor by the FBT rate.
\ .
•• I

·154
 FBT Rates·:

, . - The rates of fr.ing·e , benefit t . , . .. , .

employees are taxed - Th . . ax vary · depending on how the
income tax of the e~ e re~son IS that !he_FBT tends to recover the
, plo~ee so the. rate follows the income taxation of
sueh emp Ioyees as $hown in table 3-~ below:

Classification of Taxpayers . CIT:,RA,NRAET NRA-NETB

Monetary value . Pxx- · Pxx
Divide by gros~ monetary.value factor 65%* ·75%
Gross.~d-up monetary value Pxx Pxx
x FBT Rate.,· . '35%* ·2s%
Frin e Benefit Tax FBT Pxx Pxx
NOTE· ·
{' _ ' • l

m Prior to Jan. 1, 2018, the FBT rate was·32% ..

ILLUSTRATION 4: . · ··
Determine · the - grossed-up monetary value ·and the . fringe benefit tax. of the .
following (if applicable) for 2018 taxable year:

1. , P39,000 grocery allowance for the . personal . consumption of an

executive of ABC Corporation.
I •
. , ,

· 2. E>40,800 expenses paid _by .an , executive of ABC Corporation duly

receipted for in thf3 name of ABC Corporation and is not in the nature of
personal expense.
3. ·P40,800 expenses incu_ rred by, an executive of ABC Corporation in
connection with attending business meeting or convention.
4. P40,800 grocery allowance for the_personal consumption of one of
ABC Corporation'$ rank •and file employees. ·

'c
❖ Answers:
1. . GUMV:;;P39k/65%=P60_ ,900; . FBT=P39k/65% x 35%=P21,000
2. GUMV = P40,800**; FBT = PO
** The expenditure ,s not in the nature of per~onal expense of the CO[Tlpany's
executive, hence, it is not' a fringe benefit taxable to the employee. It is an
I l ' ordinary business expenditure of ABC Corporation
3. GUMV =P40,800; . FBT =PO; same e~planation with #2
,/ 4. GUMV = P40,800 same with mone_tary value
.FBT .=PO**; subject to.basic tax

155
 l ti. l~
The grossing up of fring b n flt w -- - dopt d In rd -r t . · llgn th _
tax treatment of ·fringe benefits with · I rle nd w~ mp n ti n
incomes presented in the income ta x return . of Individual t xp Y r r t
gross amounts, meaning, the income tax payabl on It r - in lud d, In th -
computation. The fringe benefits are ther -for g~o ,- ed-up uO th t th 1n om
tax is also. consioered as part of the total benefit. The gro d-up mon tary
value of the fringe benefit represents the entire incom rn d by th
employee. This includes the net amount of money received or th n t
monetary value 'of any property received (known as "monetary value'? and th
•amount of FBT received by the employee from the employer.

Valuation qf fringe benefits

• If granted in money, the value is the amount granted.
• If granted in property and ownership is transferred to the employee, the
value is the fair market value of the property.
■ If granted in property but ownership is not transferred to the employee,
the value is equal to the depreciation value of the property

Deductible expen~e of the employer '

If the fringe benefit is given to a rank and file employee, or to a
supervi!?ory or managerial employee, but is not subject to fringe benefit .tax,
the deduction for the employer is the monetary value of th~ fringe benefit. On
the ~ther hand, if the fringe benefit . is given to a supervisory or managerial
, employee and is subject to' fringe benefit tax, the deduction .is the grossed-up
monetary value of the fringe benefit which compose of the fringe benefit
expense and the fringe benefit tax.

ILLUSTRATION 5:
Assume an employer furnished cash fringe benefit. subject to fringe benefit tax
amounting to P97~,000' · , · · '

Question 1:
. What should be the appropriate journal ·entry in the books of the employer?
❖ 'Answer: ·
.1 Fringe benefit expen~e P975,000
(monetary value) ,
Fringe benefit tax expense 525,000
(P975,000/65%) x 35%
Cash (GUMV) *~~ (1?975,000/65%) P1 500 000
***,The P1,500,000 ~rossed-up monetary value is composed of .f2975,000 paid
to the employee and 12525,000 paid/remitted to the BIR.

156
 Question 2:
Assume that the cash tr·1 b fi . . .
should be the a . ~ge ene it is not subJect to fringe benefit tax, what
• ppropnate Jo~rnal entry of the employer? . · . .
••• Answer: ·
Fring_
e benefit expense 12975,000
(Compensation expense)
Cash 12975,000

DE MINIMIS·BENEFITS

Facilities and Privileges such as entertainment medical services

· or so _called ·"courtesy" discounts on purchases, othe~ise known as "D~
Minimis Benefits," furnished or offered by an· employer to his employees,
are not con~idered as . compensation subject to income tax and
cpnsequently to withholding tax, if such facilities or privileges are of
relatively small value and are offered or furnished by the employer merely
· as means of promoting the health, goodwill, conten.tment or efficiency of
his employees ·[Section 2. 78.1 (A)(3) of RR 2-98 as amended . by RR 10-
2008, RR · 5-2011, . RR 8-2012 and RR 1-2015]. · These benefits are
exempt from withholdi.ng tax on compensation and fringe benefits tax
(FBT), regardless .of. the po~ition of the employee who received such ·
benefit(s).

The following ?hall· be considered de r:r,inimis benefits not subject

to income tax as well as withholding tax on compensation income of both
~anagerial and rank and file employees:

1. Monetized unused vacation leave credits of private employees not

exceeding_"1 0 days" during the year.

Payment of moneti·z~d unused ".vac~tion" l~a:'e , credits

exceeding 10 _days as well as payment of _sick' leave,
. regardless of number of days shall be added t~ uother benefits".
with a P90,000 ceiling·. Any amount excee?mg the P~0 ,000
ceiiing discussed in page 156 shall b~ s~bJect to basic and
creditable withholding tax on compensation income (R.R. No. 8-
2018) •

157-
 h!:j& B ~ ~
2. Monetized value of vacation and sick leave credits paid
g~vernment officials and employees.

Compared to employees in the private _~ector, payment of mon:etized unu d

. ''vacation, ancj sick" leave,. credits to government officialslemploye.es regard/ of
the number of days shall be exerr_1pt from tax on compensation income.

3. Medical cash .allowance to dependents of employees not exce ing

P1 ,500 per semester or P250 a month.

4. Rice ·subsidy of not more than. P2,000 per month or 1 sack (50kg.) ri
per month. __;, ,

" 5. Unifor·ms given to' erpployees by the employer not exceeding P6,000
per annum' (as amended by RR 8-2018) .

. 6. Actual· medical assistance given not exceeding .P.10,000 per annum

such as medical allowance to cover medical and healthcare needs.
annual , medical/executive c~eck-.up, maternity assistance and routine
consultations.
. '

7._ Laundry allowance not.ex~eeding P300 per month.

8. Employee achievemef1t awards (e.g. for length of service or safe

achievement, which must be in the form of a tangible personal property
other than cash or gift .certificate· w,ith and annual monetary value not
exceeding P10,000 under an establishe9 written plan which does no
discriminate in favor of highly paid employees).

9. Gifts given during Christmas and major anniversary cel ebrations no ·

exceeding PS,000 per employee per a~num (RR 8-2012).

1 o:Daily m~al allowance for overtime work and night/graveyard shi ot

exceeding 25% of the basic minimum wage on a per reg.ion -asis
provided such benefit is given on account of overtime work or if given o
employees on night/graveyard shift. :
The grant of meal allowance, if not for overtime work or nigf·1 g -Ve rd sfy · , sho~ld
be subject to income tax (RR 05 ..2011). However, meal allowance· and lod ·m
furnished by the employer to the employees are exempt from tax if furnished for
"advantage or convenience of the employer". Meal allowance in thi particular c
sh~uld be furnished withi~ ~he premises of the employer.

158
 _ .· · . . h:J&B ~ Ttet
11. B~nefits received by an employee by virtue of a collective bargaining
agreement (CBA) an~ _Productivity incentive. schemes. provided that the
tota_
l ~nnual mon~tary value received from the two (2) items above ·
-c~mbmed, .do .not exceed . P-10 000.00 per employee per taxable year
(RR1-2015). · .I ' .•

BIR RULING No. 293-2015 (CBA/CNA and·Productivity Incentive Pay):

• If not more than P10,000 - considered as de minimis
• If more than P10,000 - the entire amount shall be included in the "other benefits" with
: P90,b00 ceiling. · .

NOTE:
• . Th\s ruling shall apply only to benefits under CBA and productivity incentive
" sch.~mes. CBA may also be referred to as CNA (collective negotiation agreement).
1

Th~ foregoing'· list pf de mit;1imis benefits are all inclusive. Meaning,

·all -other benefits given by e·mployers which are not included in the
enumerations above _shall not be con$idered de min·imis benefits (RR
.8-2012; RR 1-2015). ' .

Excess of de
-
mini,nis benefits over ·their respective ceilings
/

. ·. The a.mount of de minimis benefits conforming to .the ceiling of de

minimis benefits shall not be considered in determining the P90,000
-~ eiling oL "ott,er benefits" excluded from the gro~s income-under Section
328(7).(e) of the Code as amended by RA10963-TRAIN Law. On the
other hand, the excess of the de minimis benefits over their respective
.c~ilings prescribed · under this regulation shall be consid~red as part of
other benefits subject to tax only ·on the excess over t_he._P-90,000 c~iling.

All other benefits given by employers which are not included in the
. enumeration of de minimis ,benefits shall not be considered de minimis
·benefits but should fall under the classificati.on of "other benefits" and is
· therefor~ subject to the P.90,000 ceiling. The exc~ss of the benefits over
th~ P90,000 limit would fo_rm . part of an inrdividual's gross income and
wou~d be subject _to income tax and applicable creditable withholding
. taxes (refer ·to Table 3-3 fat the. applicable tax on fringe benefits and de
mi.nimis benefits).

159
 1290,000 C~iling for 13th m~nt~ pay/bonuses and "Other Benefits"

Section 32(8)(7)(E) of the Tax Code in relation to PD 851 as

amended -by RA 10653 provides ·that 13th month pay and other benefits
received by offiGials and employees of public and private entities are '
exempt from income tax and creditable withholding tax on compensation ,
provided, however, that beginning January · 1, 2018, the total exclusion
shall not ·exceed P90,000. Otherwise, the excess would form part of an
individual's gross income and vvould be subject to income tax and
applicable creditable withholding taxes. .
I

RR- 3-2015, as amended, provides that the amount of P90,000

sion (as amended) shall "only" apply to "13 th m9nth pay and other
· exclu_
benefits" prescribed under ~he provisions of 2.78.1 (8)(11 "a" and "b") of
RR 2-98- (as amended) and shall . not apply to other compensation
received by an ~mployee ~nder an ·emplqyer-employee relationship such
as basic salary .and other allowances.

"Other Benefits" under RR 2-98 Sec. 2. 78.1 (8)(11 "a" and "b") i~clude:

• .Christmas borius
• Productivity incentive bonus
• Loyalty awards
•· Gifts in cash or in kind and other benefits of similar nature actually
' ✓ received by officials and employees of ·_both government and
priva~e offices

Further, RR 3-201 B emphasized that this exclusion from gross

income is not applicable to:'
I

(1) Self-employed individuals; and

(2) Income generated from business

160
Fixed or Variable allowances

. lffn. general, fixed or variable allowances which are received by a

pu bl Ic o Icer or employee or off
addition to the . ic~r or. emp 1oyee of a private entity, in
· f regular compensation, fixed for his position or office is
1

c~mpen~a ior.1 subject to income tax and consequently, credita ble

withhold mg tax on compensation income [Section 2. 78.1 (A) of RR 2-98 ·
as amended b~ RR 10-2008]. Examples of fixed or variable allowances
are transpo_rt~t1on allowance, representation allowance, communication
allowance, hvmg away from home allowance (LAFHA), an·d the like.

Re~~onable amounts of reimbu~sements/advances for travelling and

en~ertamment expenses which are pre-computed o·n a daily basis and are
paid to an ernpl·oyee while he is on an assignment or duty need not be
subject to the requirement of substantiation and to withholding.

Business related expenses/ Allowances subject to liquidation

Any amount pai.d specifically, either as advances or reimbursements

for travelling, representation and other bona fide ordinary and necessary
expenses incurred or reasonably expected to be incurred ·by the employee
in the performance of his duties are not compensation subject to
withholding, if the following conditions are satisfied:
■ It is for ordinary . and necessary travelling and repres~ntation or
entertainment expenses paid or incurred by the employee in the
pursuit of the trade, business or profession; and
■ The employee is required to accounUliquidate for the foregoing
expenses · in accordance with the specific requirements of
substantiation .for each category of expenses pursuant to Sec. 34
of the tax code.

Representation and Transportation Allowance

Representation · and Transportation Allowances (RATA) granted

under Section 34 of the General Appropriations Act to certain officials and
employees of the government are considere? rei~bursements for the
expenses incurred in the performance one s duties .rather than as
additional compensation. Hc;,wever, the exc~ss ~f RATA, 1f not returned to .
the employer, constitutes taxable compensation income of t~e employee.

161

I •
 I

Under several rulings issued by the BIR (i.e. BIR Ruling No. DA-
250-04 ), the foregoing rule shall likewise apply to reasonable amounts of
reimbursements ·or advances for travelling and representation of private
employees.which are pre-computed on a daily basis and which are· p~id to
any employee while· on assignment or duty. Such .allowance should not
be consid~red comp.ensation ·subjeQ.t .to withholding tax. On the other
· hand,. transportatior;, and representation allowances which are fix in
amounts and are regularly received by the employees as part of their
"!onthly compe~sation are subject to basi~ tax._ ,.

Communication Allowance

Commu·nication allowance (phone allowance) granted to

employees are not subject from ·fringe benefit tax and tax on
compensation on the basis that communication allowance is deemed
required by the nature of the job of the employees and deemed necessary
to business and
-
redounas to the convenience and benefit.
,

• I

162
 TABLE 3-3:
TAX ON FRINGE BENEFITS/ DE MINIMIS and in Excess of the CEILING in De Minimis .Benefits ·

Fringe Ben~fit Fringe B~nefit

(Supervisory. & Up) (Rank and FiJe)

De Minimis?

Conforming Subject to' Conforming

to the ceiling Fringe to the
· .of De Benefit Tax ceiling of
Minimis De Minimi
Benefits? Benefits?

Yes No

'
ln"excess" ln"excess"
of P90,000 of P90,000
limit when · limit when
added with added with
"other "other
benefits? benefits?

No Yes Yes No

Exempt EXCESS is
.Ex mpt'
from tax & subject to basic
from tax ,&
creditable & creditable
er
withhold in withholding tax
g tax ,)

163
 Employer leases a residential property for Monetary Value: Rental paid x 50%
the use of the em lo ee
■ Employer owns a residential property for the Monetary Value: The higher between FMV in the Real
use of the em lo ee ro ert declaration or Zonal value x 5% x 50%
■ Employer purchases residential property in Monetary Value: Acquisition cost, exclusive of interest
installment for use of the em lo ee X 5% X 50% ***
■ Employer purchases residential property and Monetary Value of the Benefit: The higher between
transfers ownership to employee the acquisition cost or Zonal value as determined by
the CIR.
■ Employer purchases residential property and Monetary Value: The higher between the FMV in the
transfers ownership to employee on a lesser real property declaration or'Zonal as determined by the
amount CIR less cost to the em lo ee
** Annual Benefit = FMV or Zonal, whichever is higher x 5%
Monetary value of the benefit= FMV or Zonal, whichever is higher x 5% x 5-0%
***Anrwar Benefit = Acquisition cost exclusive of interest x 5%
Monetary value of the benefit = Acquisition cost exclusive of interest x 5% x 50%

TABLE 3-5: RULES IN COMPUTING THE MONETARY VALUE OF MOTORVEHI_

CLES
1) Employer owns and maintains a fleet of Monetary Value: Acquisition cost of vehicles not
motor vehicles for the use of the business normally u~ed for business divided by 5 years x 50o/c
and employees
2) · Emp·loyer /eases/maintains a fleet of motor Monetary Value: Amount of rental payments not
vehicles for the use of the business and the normally used for business purposes x 50%
employees
3) Employer purchases vehicle in the name of Monetary Value: Acquisition cost
1
employee. I

4) Employer provides employee with .cash for Monetary Value: Cash received
I

the purchase of the vehicle, and ownership is

placed in the name of the employee.
5) Employer purchases the vehicle on Monetary Value: Acquisition cost exclu ive of int re t
installment and ownership is placed in the ' divided by 5 years
name of th,e employee.
6f Employer.shoulders a portion of the amount Monet~ry Value: Amount shouldered by empl r
of the purchase price of vehiGle and
ownership is placed in the name of the
. employee. _..,

164
 . r~
- L~ .
ILLUSTRATION 6
(SPECIAL ~UL~S IN ~OMPUTING MONETARY VALUE)
The following illustrations are based on the · illustrations under Revenue
Regulations 3-98 (as amended under RA10963-TRAIN Law).
I

CASE A:
In 2021, a d~mestic corporatio.n paid for the monthly rental of a residential house
of its branch manager., Mr. Juan Dela Cruz, amounting to P156,000. (Assume
there is no transfer of ownership)
Question f What is the monetary value of the benefit?
Question 2: What is the grossed~up monetary .value of the benefit?
Question 3: How much is t~e fringe benefit tax?
Question 4: Total amount deductible by the employer from its gross
income? .· .
Question o: What is the appropriate journal entry to record the provision of
the above benefit?
❖ Answers:
Question 1: P?B,000
Question 2: P120,000
Question 3: P42,000
Question 4: P198,000

Solution:
Rental payment P15{?,000 . ,
X 50%
Monetary value 1278,000
Divide by 65%
GUMV 12120,000
x Fringe benefit tax rate 35%
Monthly Fringe benefit tax expense P42,000
Add: Rentals paid 156,000
Total Deductible Expense 12198,000

. s·. To record the transaction ' the following journal entries

Quest,on
should be made b the em lo er for the month:
Fringe benefit expense P. 156 ,000
Fringe benefit tax expense 42,000
Cash (Rental payment) P156,000
F.B. Tax Pa able 42•000

165
• I

· NOTE:
• Although the monetary value of the benefit is 50% only of the rental
payment, ·the total deductible amount of the employer is the total of the
actual rental payment and the applicable fringe benefit t8x. The entire
amount (P198, 000) is considered as total compensation expense incurred
by the employer. Therefore, the special rules in computing the monetary
value of the benefit should be taken into consideration only for purposes
of computing the fringe benefit tax

CASE B:
A domestic corporation owns a condominium unit. In 2021, the said corporation
Jurnished and granted the said property for the residential use of its Assistant
Vice . President.. Thre fair market value of the property per BIR assessment
amounts to P1 Q,000,000, while its fair market value as shown in its current Real
Property Declaration amounts to PB,000,000. Determine the following:
· 1: Monthly Monetary value of the benefit?
2: Monthly Grossed-up monetary value of the benefit?
3: Monthly Fringe benefit expense?
3: Monthly Fringe benefit tax expense?
I •
4: Total amount deductible by the employer for the month?
5: Journal entry to' record the provision of the above benefit?
❖ Answers:
1: P20,833
2: P32,951
3:PO .
4:P11,218
5: P11,218
Solution:
FMV per BIR assessment (Higher) P10,000,000
x. 5%
Value of the ben.efit 500 000
I

X 50°1<
Annual Monetary value P250 000
Divide by 12 month
Monthly monetary value P20 833
Divide by . 65
Grossed-up monetary val_ue P32,051
x Fringe benefit tax rate 35%
Fringe benefit tax P11,218
Deductibl.e by the employer P11,2'18

166
 NOTE:
• Fringe benefit expense is PO
The "~ringe benefit tax expense" in this c~se is already the amount
~educttble from the employer's gross income as fringe benefit expense.
he employer, shall not ,further claim other deduction such as the
mo~eta'r value of the benefit because the cost for the use of the
resid~nflal property has been or will be recovered as deduction from its
gross income under "Depreciation_expense" (RR 3-98). ·
I

• To record the transaction, the following journal entries should_be

made: . ·
Fringe benefit tax expense 1211,218
Frin e benefit tax a able P11,218

CASE C: ·
Using the same data in Case ·B and ass~ming that ·the acquisition cost at' the
property ·is PS,000,000 with a remaining useful life of ten (10) years. How much
is the monthly fringe ·benefit expense? ·
❖ Answers: P41,667 computed a~ follow_s:
FMV per BIR assessment (Higher) P10,000,000
.Less: cost {5,000,000)
Excess of FMV over cost 5,000,000
./ Divide by its remaining life , 10 years
Fringe benefit expense (for the year) 500,000
Divideby . . 12 months
. Monthly fringe benefit expense P41,6$7

NOTE:· I

.■ . Fringe benefit expe(lse for the month is P41,667

If the·zonal value or fair market value of the said property is greater than
its cost subiect to depreciation, the excess amount shall be used in
computing Bdditional depreciation expense allowed as a deduction from
-the employer's gross income as fringe benefit expense and shall be
amortized throughout the remaining useful life (RR 3-98). The journal
entry for ~he month in this case as provided in the foregoing· revenue
re ulation shall be:
Fringe benefit expense P41 ,667
Fringe benefit tax expense 11 ,218
Income constructively realized P41 ,667
Frin e benefit tax a able 11 ,218 ~

167
 NON-TAXABLE HOUSING BENEFITS
The following ·housing benefits shall not be considered taxable fringe
benefits ($ection 33 - tax code):

1) Housing unit insideror adjacent (within so·meters) from the perimeter of

the business premises.

A housing unit which is situated "inside ·or adjacent" to the premises

of a business shall not be· considered as a taxable fringe benefit. A housing
unit is considered adjacent to ttie premises of the business if it is located
, .within th_e maximum of fifty (50) meters from ttie perimeter of the busin~ss. A
housing unit shall be considered to' be for the "convenience· or advantage of
the employer'' 1f the same is within fifty (50) meters' from the ·perimeter of the
business premises and the employees ·are required to be on-call due to the
pafure of the employer's operation (BIR Ruling No. DA-635-04, Dec.ember 15,
-'2004 issued to Foreign Holiday Philippines, Inc. and BIR Ruling No. DA-241-
04, May 7, 2004 issued to Sohbi Koghei {Phils. ), Inc.)

2 ) Temporary housing for a stay in the housing unit for three (3) months or
_
less. · ·
3) Housing privilege of military officials of.the Armed Forces of the
Philippines. · . .

Other· Fringe Benefits .

·under this· category, the value of the benefit repres~nting·the amount
given or paid by the employer should also be the "monetary" value of the
benefit. · ~

1) Expense account. .
· Expense account niay be taxable as fringe benefits or treated as
compensation_income depending on the nature of the expense account
provided to employe~s.

a. -Taxable as fringe benefits

■ Expense . accounts paid for or reimbursed by employer (such as
personal expenses like groceries) are taxable fringe benefits.
However, if the expenses were receipted in the name of · the
employer · and do not- partake the nature of "personal expenses"
attributable to employees, such expense accounts should not be
· taxable as fringe benefits. I~ should neither be included in the
_. determination of the individual taxpayers' taxable compensation
income. •

168
. ,.
 .,

b.· Not treated as taxable fringe benefits

Representation and transportatioh allowance given regularly

(Page 161) on a monthly basis are not taxable fringe benefits but
taxable as compensation income subject to basic tax under Sec. 2_4(A)
of the Tax Code.

· 2) Expenses for foreign travel

Expenses in . connection with attending business meeting . or

conven_tion . (inland travel expenses). such· as food, beverages and
transportation during foreign travel (except lodging cost in a hotel) at an
average of $300 per day are considered reasonable expenses and ·shall
not be subject to fringe benefit tax. The cost of economy and business
class airplane ticket shqll not be subject to fringe benefit tax. However,
· 30% of the cost of first class airplane ticket shall be subject to fringe
benefit tax. In the absence of documentary evidence showing that the
employee's fravel abroad ·was in connection with business meeting or
convention, the · entire cost of ticket, including cost of hotel
accommodations and other expenses shouldered by employer shall be
treated ~s tax~b_le fringe benefits.

Traveling exp.ense· of family .·members ot' employees paid for by

_ employer shall be treated as taxabl·e fringe benefit.

3) Educational assistance to the employee _or his dependents

In general, cost of educational assistance is treated as taxable fringe
benefit except: • · ,
a. When the study is directly connected with the employer's trade,
business or profession and there is a_written 'contract between -the
- employee and ' employer that the former is under obligation to
remain in the eniploy of the employer for a period of time
b. When given to employee's dependents through a competitive
· - scheme
. under scholarship program of_the _col'!'pany.
.

4) Membership dyes or fees of emploYiees borne by employer in social <:3nd

athletic clubs .or other similar organizations.

5) Life or health insurance and other non-life insurance premiums are treated
as taxable benefits.

169
6) . The following shall not be treated as taxable fringe benefits:
a. Fringe benefits which are authorized and exempted from income tax
under the T,ax Code or under any special la~ (Page 152).
b. The fringe benefit is required by the nature of or necessary to the
Vade, business or profession of th_e employer (Page 152).
c. When the fringe benefit is for the convenience or advantage of the
employer (Page 152).
d. Contributions of the employer for the benefit of the employee to
· retireme~t, insurance and hospitalization benefit plans.
e. B~nefits given to rank and file .employees . .·
f. Non-taxable housing be·nefits discussed in Page 16~.
g. Other non-taxable benefits discussed in this Chapter.

Use of Aircraft and Helicopters

The Use of a1rcraft and heli~opters owned and maintained by the
employer is not a tax·able fringe- benefit but' treated as business expense
. of _
the. employer. ·

FILING OF RETURNS _. ·

The tax return shall be filed and the tax paid/remitted not later than
the -last day of the m·onth follo\r~ing the close ·of the quarter during which
withholding was made (TRAIN Law; RR 11-2018).

ILLUSTRAT10N 5:
Assume an employer furnished cash fringe benefit subject to fringe benefit tax amoun ing
Jo P975,000 during the first qu·arter of 2020 taxable year.

What should be the ·appropriate journ.al ·entry in the·books of th~ employer?

❖ Answer:
Fringe benefit expense P975,000
(monetary value)
Fringe benefit tax expense 525,000
(P975,000/65%)·x 35%
Cash GUMV *** P975,000/65% P1 500 000 1

***The P1 ,500,000 grossed-up _

monetary value is composed of P.975,,000 p i to
the employee and P525,000 paid/remitted to the BIR.

170
 BIR Form No. Q arterty Remittance Return
1603Q of Fir'IEd lnoome Taxes Withheld on Fringe Benefits
Paid t~ Emp!toyees Other Than Rank and File

7 11 C3tegory of Withho:dirig ~ent (X] Private

mai . com ,
0 No . 13A 1 yes·. specify

Part 11- C.omputation ofT~.

.,,
15 Le5.s: Tax Remitted in Retuo"I PrevioLl!ly Filed. iHhiJ is an,amended re

16 I

RCG CORPORATIO

rtfflf ReorKtntatt,•f fl ill'. A

VtttTW;

171
 Fr:y~B:ft 7ttt
Bl

l lll■J
Quarterly Remittance .Return·
1603Q of Fin-11Income Taxes Withheld on Fringe B•enefits
Paid to ·Emp'loyees Other Than Rank and FUe
nt's, Na.me Last Name fer lndNi:Jual CR

t·
9 7 5 0 0 0 00
2

Sd'IHUle 1 ·oontinuatiotl

_1
1 0 0 0 0 0
2

3 bW:T~ W~ ($umol_llems' 1 ana 2) (fo Padll, ttem 14) 5 2 5 00 0 0 0

Guidelines and Instructions fo1· BIR F·o rm No. l603Q (January 2018 (E.t'l-CS)]
Qunrtedy R.e.uptfan-ce Re-tum of Fin:il Income T:nu Withheld
on Fring:e & .odds P:iid to Employee~O th e-r Th.n:n lbnk nnd File
Wlii iluoll
. Thi; . ta' ~ li!cd ii lnj f'n:altl«,
.. 1b f1rtt,1Gl Th:,<: ~un
Ir- i::,;,,...J .at.cl a.,fa:r.,_..::r! '-'-J'"'l <>
I. A ~wt,e d !'ad! ..fr,q:o u:ti ~ )
' ·t!:cldu:il,.£u 0bc,;uiloi1ilh:: -ll: ~ F, uac k 'I R,: "' min ,nl """11
fR,<.L-.1, u ttt aula1r~>r.l 11lr,at h Filat • rdwn ,.;a. • ;cr1u1 " ' .n.:.: a:tlc·
lic-.l'ltlldi i . '""' iam=aua-.::i, ~t . . ~ ...... ;all)r,n1::l "' Qz ua::rumuu,:r-, .
a.-..:mihl ·• "' • nili:iaSO:.lllbe n r,)litba'h ~ F•il01 c w f'")'imd lhc --· u, JVl cl lb:
ur ffif-l, .-..: lu""'t a.nl ·· ;-yu,,,u ...,1,!ln u-rtii::c:r'Ul'c"lwyc,::
ilf l),o f'JIP'l'C, lhc fff .,-hid tu ,ain. u "','='al t, tt lib! u,,a·
'ioilh ~ i.,, • r ~ . -! k rti.m WI Ir """1t: ln !ho an,: uf ll\t ..Evi.luil c:t!al:« 1tt1 b ~ , ii. F, ilm: ~, fU"prmil lb: dcifci:»::J tu w· "n Or li::x
;u::h C'du6s)· itb mJ 'lin Dhi. auc1c-d ,aud ~ !hl.r:ia,y l:i"""' d - «- :;:w_.... ;_,iu (ltw..ri:>, lie -ur-•~rr.:1-
q,,cJ ad ,...-ificJ ·• o( ,ut:b !.1..ri"a,,ic,. 2.. A ~~ d' finy 1"-"""'>l ) ii
· ~can!a!i•c • A.:r...--db:J 'I u !.t,t:r£ ru· - behtlf -Of !lJe lb' •ya:, l'hall fil> ,_,., !ltil lee nm¼: I.d u ~u d ~ d th:
m lhc: f's ul ta."'->"' lbcU ~ 'i.' <i l ·r qb.t i,, m:, rh: ~un
..._. allll \!i'lo,n .. ru. _, ,..,,.._u ti. A ru.., et (,.,ilul=I rd u:u i, .,.'tll!ull, -.:..ik
3. 111:ttftcth:,ai
i.U ·l!inatun=t1'na::,::lla lllx-lilaJ Ll,cW~li:dml W.:.flunllc
• i~lk bcofrh:: q..,i:cr .Z..,• .. 1ra;;.-..l:111', l1illi!"""" n-.a:k ..,. ~:q:m:, 11.t>
'l:'otc:!, J:.M ,dh ~ kY ~ ~ lirf:C ~ °"
••'M d;;;E file, '1b .t i rl>: Elo:."""°i.: p,;y,:_:at.'r=i •
(c""PS}. d.:..!1nc J,..-c~ a ! J J 15'1! th:: HI.ID .,.J JD' ~ l r c t , ~ rlot: 1.uo: cdtlt: ~,q
~ a: ...-ll, lie pntl-tU.'ld · c:ai:di~ ~t:,n'nllX ilm,_c,(a R:c-..-w:C,..:_
Tl1< n!'LD cLI h< lib m:1 Cu li>< ,,-i.1,'im ri:,d with d1< A<lht.iJ.oil Apt ll:au (AA.qi or lhc -P~, 4. Ca1i4nxt1x f'Dl,dlf u F
Di.ui::r oo-- (1'!00) ao,' .~ ......- lb.: .,.llll.,11:nt -.,,r,Jt, .. , i;1azt w-~ .
·•.c:1A£c<.1 .?....--k, rb: rc:i.m>hJJ b:til m! r!o: ~ Cl i."fl V.,· -
ROO ""'""Jj.:r'Wki::a IN<'f ll-.: ';.'A •• ,,bo::c an Ill F· ri: Ar
11<--=-=0lf"tJ:ul Rmcip ll . llacb . ' c:.:..i: cli
"'tb:11
pru,<i.W
AAB.-aec ,...
..-i, «>¼; l.:f'a ••
j;.~ I , ,.,..
bsytlmt
be n ' th,-lt «1lio: ra i l' ,
I,: p;·.o:
tttlin. r1n lkDJ ~a::r: u.l fur <od1In.rd,
lfa::r: •rd aJJ 11,e b•::d lfl!i ca. In L'llc

f'i'lq,oa-ftlrM!irH.
Fn,, F,liind'<.1 -..a •rrt ~ ......~ 'ut 1t.'i:,· m lii :,ml
iin:I, m ~ ' 1 1 llJ 1.-i: l..h,,a fa Dl'.!tJor«f. (o:r(i nnl .,,.) r, c
' J lii:

172
 PROBLEMS

P3.1. Determine if the following income$ are $Ubject to basic tax, fringe
benefit tax or exempt from tax by putting a check mark in the column
provided below. If th~ value of the benefit is provided , indicate the correct
amount.
C

Amount Subject to Subject to Exempt

FBT Basic Tax
1. Officer's expense account not P120,000
. subject to liquidation
I

2. Officer's expense account 80,000

subject to liquidation

3. Personal" expenses of the

company officer$, paid for or 50,000 -
reimbursed by the comp~ny-
emp.loyer

4. Annual uniform allowances 6,000

granted to an exequtive

5.. Housing benefits of officials of 360,000

the Philippine Army

6. ·Housing benefits of officials of 250,000

a domestic-corporation

7. Housing unit furnished to an

employee, where said unit was 45,000
situated inside or -adjacent to
8. the premises of ~he business ., .
9. Monetized .unused vacation 15_,000
-leave credits not exceeding 10 - '
'
days.

10. Household personnel benefit I

60,000
by an officer of a domestic
corporation. '

11. Annual medical cash allowance 1,500

to dependents

173
 .. C/yer £ercisu - /r!:/e, B:fr 7~
P3.2. In -2021, ~arcia Realty Gorporation paid .~3-25,000 to Wilderness
Resort, representing 'vacation exp·e·nses of Mike, ah executive of Garcia
Company. Answer the following? .
a. Is this a taxable fringe benefit?
b. How.·much ·is the tax base of the fringe benefit?
c. Should the taxable fringe benefit be included in the returnable
income of Mike for the year? .
d. How mµch is the fringe benefit tax collected?
e. When is the fringe benefit tax remitted?· .
f. .Assuming Mike is a rank-and-file employee_, is the fringe benefit
subject to fringe benefit tax? ·

P3.3. LJ is a resident citizen employed by Chris·Sports,· Incorporated.

He received the following from his employer during 2021:
Basic compensation income ., P900,000
th
13 month pay 75,000
P3,000 monthly transportation allowance 36,000
Productivity incentive pay 10,000
Christmas bonus · 25,000
Uniform allowance 16,000
Actual ·medical allowance 10,000
Rice s_
ubsidy · 36,000

Required: Determine LJ's taxable net income

P3.4. Assume the same data in P3.3 except that the productivity ·
· incentive pay amounted td P20,000.
Required: Determine LJ's taxable net inco_me

:pJ.5. A rank and file ~mployee receiv~d the following·compensation and

benefits received' during 2021:
Sasic compensation income · P540,000
th
13 month pay · 45,000
· Mid-year bonus 22,500
Christmas gift · / 10,000
Uniform allowance 7,500
_. Actual medical allowance 15,000
1
Medical allowance to dependen'ts 2,000
Rice subsidy . .· 18,000
M'onetized vacation ·1eave for 12 days (P2,000/day) 24,000
Requir;ecj: Determine the employee's taxable net income

.. 174
 P3.6. SPECIAL RULES IN COMPUTING THE MONETARY VALUE OF .
FRINGE BENEFITS . I

1. XY?- Co. leased a ·residential house for the use of its branch manager.
The rent per agre.ement-was P165,000 per month.
a.How much is the monetary value of the benefit for the month?
b. H_o w much is the fringe benefit tax for the month?

2. XYZ .. Company owns residential property which i~ assigned to its

officer for use. The following data pertain to the residential property
Cost P5,00,0,000
Fair market value per BIR 4 ,500,000
Fair market value per Assessor's 3,000,000
office

a. How much is the monetary ·value of the benefit for the

qµarte~ .
b. How much is the fringe benefit tax for the quarter?
. ' '

3. Using the same data in no. 2, and assuming that XYZ Company
transferred the ownership of the residential property in the name of the
officer, answer the following:
' a.How niuch is monetary value of the benefit?
b. How much is the fringe benefit tax? ·

4. Chen Company purchased a motor vehicl~ for the use ·of its manager.
The vehicle was registered in manager's name. The cost of the
vehicle was P1 ,200,000 'i.Jsed partly for personal purposes and partly
for the benefit of the company. Compute the following.
· a. Monetary value of the benefit
b. Fringe benefit tax

5. Using the same data in no. 4 and assuming that Chen shouldered only
· a portion of the cost of t~e car in the amount of P800,000 and the
balance paid by the manager, determine the following:
.a. Mone,tary value of the benefit
. b. Fringe benefit tax

6. Using the same data in no. 4 and assuming that Chen purchased the
car in the name of the manager on installment basis. Determine the
following: ,
a. Monetary value of the benefit
b. Fringe benefit tax

17.5
 ' .
TRUE1 OR FALSE I • •

Write True -if the statement is cor~ect, othe_rw1se, write Fals,e_ .

1. A Jringe b~nefit is any goods, serv_1ce._or o_ther ~eneftts .furn1 sh~d or
·granted by an employer in cash or tn ktnd, including baSIC sa,lanes to
individual employees. . ._ . .
2. A _fringe benefit which is subj~ct to the fringe benefit tax ts taxa ble
income of the employee. · · . . .
3. ·A fringe .benefit which is not subject to the fringe b~:mef1t tax 1s taxable
income of the·employee,. .

4. Fringe . benefits subject to fringe benefit tax cover only those fringe
b~nefits given or -furnished to a managerial or supervisory employee.
5. Fringe benefit tax shall be treated as a final income tax on the
employee withheld and paid by the employer on a quarterly' basis.
6. The grossed-up monetary · value of the fringe benefit is . the actual
.amount received by the employee.

7. . The grossed-up monetary value of the fringe b,enefit shall be

-, determined by dividing .the monetary value of fringe benefit by the
grosse_ d up monetary value factor. ·
8.. J"he person liable for fringe benefit tax is the employer, whether he is
- an individual, professional partnership or a corporation regardless of
whether the corporation is taxable or not or the government and itsI

instrumentalities
9. A managerial employee is one ·who is vested with powers of
prerogatives to lay down and execute management policies and/or to
· hire, transfer-, suspend, ·lay-off, recall discharge, assign or discipline
employe~s, or to effectively recommend such manag·erial actions.

1ff. The ~ra~t of fri~ge ~enefits to the employee is exempt from tax if such
grant is r~quired by the nature of, or necessary to the trade, business
or profession of the employer.
11. The amount on which the fringe benefit tax rate is applied is the
monetary value of the fringe benefit. _
12. The amount o_n which the fringe benefit tax rate is applied is the
. amount deductible by the employer from its gross income. ·

13. ~rossed-up _.monetary value is reflected in the books of accounts as

fn~ge bP.nef1~ expense and fringe benefit tax expense.
14. Failure to withhold the required tax on salary is collectible from the
employer. '
15 · Failur_e to withhold. the correct amount due to false inform-ation
supplied by the ~mployee shall be the liability of the employee.

· 176
 _· ·.. _·_ Co/'er q«asu - h::J&Beyt Tf!;
(°MODIFIED) IDENTIFICATION ·- · · ... ·
Determi~e whether or not the following is subject to fringe benefit tax.
Write A if the benefit is subject to fringe benefit tax, otherwise, 'write B.
Assume further that the employee is holding ·supervisory or managerial
position unless stated otherwise. , .
1. · Fringe ·bef')efit required 9y the n~ture of or necessary to trade or
business of the employer. . · •
2. Fringe benefit for the convenienQe or advantage of the employer.
.3. Ca~ plan for managerial empl.oyees. · . ,· · ·· .
4. Daily ~eal ·allowance for managerial employees. .
5. Monetized unuse.d vacation leave . credits of private employees not
exceeding 10 days. . .· , .

6. Monetized unused vacation leave credits of governm·ent employees in

excess of 10 days. ·
7. Monetize.d value of sick leave credits not exceeding 10 days.
8. Monetized value of sick leave credits of private employees in excess
of 10 days.
9. Compensation income of supervisory and managerial employees.
10. Hqusing units situated inside or adjacent to business or factory
· (located within 50 meters from the perimeter of business). · · ·

11 .. House benefits to the Chief Finance Officer of the company

12~Allowances received by supervisory and managerial employees not'
subject to liquidation,. . .
13. Used by employee of aircraft (including helicopters) owned/maintained
by the employer. . ·
st
14. Cost of 1 class/bu~iness class airplane ticket for business travel or
convention abroad in excess of 70%.
15. De miriimis benefits received by an ~xecutive of a company.
• I

16. Educational assistance (Master of Science in. Accountancy) granted to

Fe, the Finance Manager of ABC Company. No writte.n contract ·was
executed by Fe and ABC. 1
•

17. Premiums borne. by the employer for the group insurance of its
employees - . . . .
18. Contributions of the employer for the ·benefit of the employ~e . to
· retirement insurance and hospitalization benefit plans. ·
' '

19. R~imbursement of transport~tio)n expenses paid to a mes~enger of

the company ·
20. Contributions made ·by an employer to SSS, GSIS and similar
· contributions under existing 'laws in excess of what the law requires as
contdbutions.

177
MULTIPLE CHOICE
Choose the letter bf the correct answer.
' ' '

Principles .
1. Which of the fol,lowing statements is correct?
I. Th~ fringe benefit tax is a final with_
holding tax on the grossed-
up monetary value of ,the ffinge benefit granted by the
employer to . a,n employee who holds .a managerial or
s·u pervisory position. . · ' .
11. . Fringe benefit tax i~ e~ective regardless of whether the
employer is an individual, professional partnership or a
corporation (regardless of whether the corporation is taxable
or not).. . · ,
Ill. The_ fringe . benefit tax regulations cover only those fringe
benefits give·n or furnished -to· managerial pr supervisory
· employees. The regulations do not cover those benefits which
are part of compensation income, because these are subject
1o creditable withholc;iing tax on c_ ompensation in accordance
with RR No.2-98, as amended . . ·
a. I only c.. I·, II a·nd Ill
b. I and II only d. None of the above

2. Stat~ment 1: Fringe benefits are forms of incentives to employees ..

Statement 2: Fringe benefits include salaries, services, or other
benefit given by employer to an individual employee.
a. Only statement 1 is correct ·
b. · Only statem~nt 2 is correct ·
c. Both statements are correct
. d. Both. statements are not corred

3. Which of the • following statements regarding . fringe benefit tax is

wrong? ,
a. Fringe benefit tax is imposed ·on the employee
· b. The employer is the one liable for the payment of fringe benefit
tax
C. Both "a" and ""-b"
d~ Neither "a" nor "b"
4. This income of a resident alien holding ,manag~rial position is subject
to basic tax
a. Fri'nge benefit tax . . .
b. Interest income from Philippi'ne currency deposit with Security
Bank

178
 , .

. . · . o ffer qer@e,, _: h:J~Be;/' Tat

c. P~0,000 winnings from 'PCSO and Philippine lotto
d. · Prizes from S&R (P10,,000), Gateway (P10,000), and Glorieta
000) or a total of P30,000
(P10,_ . .

5~ Which of the following · is a fringe benefit not covered by the fringe

benefit lax . . . .
a. l;)e minfmis benefit. . .
b. Housing privileges granted to rank and file employe·es.
c. Fringe benefits granted as a result of the nature of the
.business,' trade, 'or profession of the employer. ·
d. All of these,. ~ · ·
. .

6. The following earnings are subject .to fringe benefit tax, except
a. Salary.of a rank-and-file employee .
b. Housing _necessary.for trade and for the convenience of the
·employer ·
c. Food allowance for the convenience of ttie employer and
necessary in the conduct of the business
d. All of the above

7. · T-he followir:,g are· exempt fringe benefits, except for one

a. · Fringe benefits given to rank and file employee.
b. Fringe benefit given for the convenience of the employee.
c. When the fringe benefit is required by the nature of . or
necessary to the . tra_de, · business or · profession of the
1 -
r employer. . ·
d: ·. Rice benefit amounting to P1 ,500 a month.

8. Which of the following benefits is not subject to the fringe benefits tax?
·a. Contributions of the employer for the benefit of the employee
- to retirement, insurance and hospitalization benefit plans
b. Housing
c. · Expense account
d. Vehicle 9f any ki~d
I .,

. 9. Statement 1: · Household of th~ employee borne by the employer such

as salaries of household help, personal driver and: other similar
personal expenses are taxable fringe benefits. .
I •
Statement 2: A fringe benefit which -is not subject to the fringe benefit
tax is returnable income of the employee.
a. Statements 1. and 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

179
1O. F~inge benefit tax- is computed based on the ·
a. Monetary value of the fringe benefit .
b. Book value of the fringe benefit ·
c. Grossed-up monetary value of the fringe benefit
·d. Fair value of the fringe benefit

11. Which ' of the following· statements regarding grossed-up monetary

·value is correct?
I. The grossed-up monetary ·value of the fringe benefit is simply
a figure meant to represent the entire income earned by the
employee.
• 11. The grossed-up monetary value includes the net amount of
money received, the- net monetary value of any_ property
received, and the amount of fringe benefit tax.
Ill. The grossed-:-UP monetary yafue of the fringe benefit is
determined by dividing the monetary value of the fringe benefit
by 65% starting January 1, 2018.
a. I only c. I, If and Ill
b. I and II on·ly d. None of the -above

12. Which statement is wrong? The amount on which the fringe benefit tax
rate is applied is: .
a. The monetary value of the fringe benefit
b. The grossed-up monetary value of fringe benefit
c. The amount deductible by the employer from his/its gross
income ,•

d. Reflected in the books of accounts in the two accounts of

"fringe benefit expense" and "fringe benefit tax expense
11

13, If both the fringe benefit expense and the fringe benefit tax expense
are allowed as deductions from gross income of.. a corporation , the
entry iri the books of accounts is
a. Fringe benefit expense XXX
Fringe benefit tax expense XXX
Cash XXX
b. Fringe benefit tax expense XXX
. Cash XXX
c. Fringe benefit expense XXX
Fringe benefit tax expense XXX
Income constructively XXX
received
Cash XXX
d. Any of the above

180
 14. The monetary value of fringe benefit -if given in money is
· a. Fair market value (BIR) or zonal value whichever is higher.
b. Amount' granted
c. Depreciated value
_d. Acquisition cost plus other incidental costs

15. Statement 1: if the employer did not withhold the fringe benefit tax
and subsequently discovered and assessed by the BIR, the related
fringe benefit tax is not allowed as a deduction from the employer's
gross income.
Statement 2: Fringe benefit tax includes additional benefit granted by
· the employer to _the employees in aadition to the basic salary.
a. Statements 1 and 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements .1 and 2 are true

16. Statement 1: The exemption of any fringe benefit from the fringe
benefit tax shall not be interpreted to mean exemption from any other
. income tax imposed under the Tax Code except .jf the same is likewise
expressly exempt from any other inc~me tax imposed under the Tax
·Code or urider any other existing law. · ·

Statement 2: If the fringe benefit is exempted from the fringe benefit

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 withholding tax on compensation income payment.
a. Statements· 1 and 2 are false .
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements.1 and 2 are true

17. Cost of life or health insurance and other non-life insurance premi ums
. borne by the employer for his employee shall be treated as taxable
fringe benefit, except
a. Contributions of the employer for the benefit of the employee
pursuant to provision of existing SSS and GSIS laws.
b. Cost of premiums borne by the employer for the group
insurance of his employees.
c. Both "a" and "b".
d. None of the above

181
 ..,
.
I •
' .
18. Which of the folfowing statements regarding _frin.g e benefit is tru~?
I. Expenses incurred by the employee bu~ w_ hich ~re paid for or
reimbursed by the -emploYer are taxable fringe benefits, _
EXCEPT when the expenditures are duly receipted for and in
the name.of the employer and ~he-expenditures do not partake .
. the .nature of a personal expense attributable ,to the employee.
11.- Benefits •given to the rank and file, whether granted under a
collective bargaining agreement. or not are subject to fringe .
benefit tax. . .
Ill. The exemption of any fringe behefit from the fringe ben~fit tax
., shall NOT be interpreted to mean exer:r,ption from any other
income tax unless ·the ·same is ·likewise e?(empt by law.
a. l:only . ·c. I, and 11 ·only
b. I and Ill only d .. All ·of the above .
I

. 19. Fringe benefits NOT SUBJECT to fringe benefit tax include which of
_· . the follqwing? ·
I., Fringe benefiis authorized and exempted from income tax
. under the Code or under any special law.
11. Contrib~tions of the employer for the benefit ofthe employee
to retirement, insurance, and ho?pitalization benefit plans.
Ill. s ·enefits g·iven .to ·the rank and file, whether granted under a
collective bargaining agreement or not. ·
IV. De minimis benefits-.
a. I and-II _o nly c. All of the above ·
b. 11 and -111 only · . . d. None of the above

20. Which of the following shall be subj~ct to fring~ benefits tax? .

· a. Housing privilege of Armed Forces of th~ Philippines.
b. _H ousing units situated. inside or adjacent to business or factory
(located within ~O meters from the perimeter of the business.
c. Te,r ilporary housing for. an employee who stays in the housing
unit for 3 months or less. - · . .
d. Housing privilege of an alien employee of an offshore '·banking
.unit in the Philippines ..
• I

ComputaJion of FBT .
21 ~ How much is· the · allowable deduction from busines·s ·income of a
do~e~tic corporation. which ·granted and pa!d P97 ,500 fringe benefits
to ,ts key officers in 2021? · · · ·
. a . . P150,000 · . , c. P99,000·
b. P100,000 d . . 95,000

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 . I •

. ' I c'fter £erci.se6 -.h::J&B:f lfttt

22. In 202.1, ABC Corporation gave the following fringe benefits· to ifs
employees
. To managerial employees P1,300,000
To.~ank a~d file employees . 5,000,000

The allowable 9educti.on from the gross· income ·of the corporation
for the fri_nge benefits given fo employees .is. .
a . .P2,000,000 · . c. P6,320,000 . .
~- P2, 148',000 d . .P?,000,000

23'. {n 2021, ABC Corporation provided a 3-day vacation in Tagaytay to all

of it~ employees of ·which 80% are rank and file. Total expenses
· in~urred .by the company .for the said vacation :amounted to ·
P1 ,200,000. The fringe benefit .tax ·expense is-
. a. · P4 70,588 c. P84;000
b'; P376,470 ,d. P129,231

_24. Using the above data, the total deductible expense is

·· a. P1 ,294, 11-8 · c. P1 ,284,000
b. P294, 118 0- d. P1 .,32~,231
. ,I

Use the following data for th~ next two questions:

From a managerial employee- for taxab'le year 2021:
, Salaries and wages- net of t~e following P681,200
- SSS and medicare ·contributioris 12,000
- tax withheld 134,800
Total ,fixed monthly allowance (PS,000/mo.) 60,000
.Allowance, not subject to liquidation 48·,ooo
Gasoline allowance, subject to liquidation. 30,000
13th month pay · · · · 68,000
Christmas bonus 15,0Q0

25. The· gross compensation income subjec~ to graduated rate is

a. P440,000 . c; P816,000
, b. P681,200 d. P876,000

26. The fringe benefit tax due from the ~bove benefit is
a. P36, 706 , : c. P24,941
b. P33,412 d. P25,846

183
 01ft; qercue,s - Fry &B~ Z ,·
Special Rules on the Determination of the Monetary Value for
Housing and Vehicle Benefits

27. For purposes of the fringe benefit tax, the monetary value of a housing
benefit granted by employer to employee where the housing unit
provided for use by th·e employee as his usual place of residence is
owned by the employer. · · .
.a. The amount of depreciation for the housing unit.
b. 50% of the annual value yvhich is Q% of the fair market va lue·
or zonal value, whichever is higher. ·
c. 50% of the amount of depreciation.
d. Net book value

28. In 2021, Mabuhay Corporation paid for the annual rental of a

residential house used by its gen~ral manager amounting to
P637,500. The deductible amount of Mabuhay Corporation is .
a. P637,500 c. P468, 750
b. P318,750 d. P809,135

Use the lo/lowing data for the next five questions:

. Included in the compensation package of an executive was the free use of
the company's residential condominium unit in Mak"ati City, Philippi nes.
Data on the condominium unit for 2020 taxable year follows: ·

_
F air market value in the Real Property Declaration P1 ,000 ,000
Zonal value . 2,000,000
Fair market value 2,5001000

29. How much is the monetary value of the fringe benefit and the fringe
benefit tax, respectively?
a. P4, 167; P2,244 G- P2,000 ,000; P705 ,832
b. PS0,000; P26,923 d. P6,127.45; P945 ,177

30. Assume the residential condominium unit was purchased by ·t,e

· ·company in installment for the executive's free use. Acquisiti on c
exclusive of interest was P3,000,000. At what amount should th •
company report as the monthly monetary value of the fring . · . n. 1·
and the fringe benefit tax, respectively?
a. P4, 166.67; P1 ,961 c. P2,000 ,000; P705 ,832
b. P1 ,500,000; P326,400 d. P6,25.0; P3 ,365

184
 C~er ~ Uu - h:J&B7' ·Tttt
31. A$sume t_he_ residential condominium unit was purchased by the
QOmpany in installment, ownership of which will be transferred to the
executive. Acquisition cost exclusive .of interest was P3,000,000 with a
zonal value determined at P5,000,000. At what amount should the
c?mpany re_port as the monetary value of the fringe benefit and the
fringe benefit tax, respectively?
a. P416,667; P19q,078 c. · P2,000,000; P705,832
b. P5,000,000;P2,692,308 d. P75,000; P35,294
. .
32. Assume the residential condominium unit was .. purchased by the
company in installment, ownership of which will be transferred to the
executive. Acq·uisition cost exclusive of interest was P3,000,000 with a
zonal v~lue determined at P5,000,000. The employee is required to
pay P2,000,000 to the . employer before the transfer of ownership is
· n:,ade. At what amount S8o.uld the company .report as the monetary
value ·of the fringe benefit and the fringe benefit tax, respectively?
a. P3,000,000; P1 ,615,385 c. P250,000; P117,647.05
b. P1 ,500;000; P326,4o·o d. P6,250; P2,941.18

33. Ass·ume the residential condomjnium unit is located in Cebu and that
the executive is allowed to use .the same for a period of three months
while he is completing an eval.uation of the over-all performance of the
company's Cebu branch. At what amount should the company report·
as ·the monetary value of the fringe benefit and the fringe benefit tax,
respectively? · ·
a. P4, 1667.67; P1 ,961 c. P2,000,000; P705,832
b. P1 ,500,000; P326,400 d. PO; PO

Use the following data for the next five questions:

Included ·in the compensation package of the Chief Accountant is a car
plan worth P1 ,000,000. The ownership will b~ transferred in the name of
the employee. .
34. Assume the employer purchases the car in the name of the employee.
At what amount should the em'pl6yer report as the grossed-up
· monetary value of the fr~nge benefit and the fringe benefit tax
respectively?
a. P1 ,538,462; P538,462 c. P735,294; P235,294
b. P1 ,000,000; P320,000 d. PS00,000; P160 ,000

35. Assume the employer provides P800,000 to the employee to purchase

any vehicle of his interest, Ownership of the car is placed in the name
of the employee. The employee purchased a brand new car worth
P1 ,200,000. At what amount should the employer report as the

185
 ·c'fter Eteras~ .-.h:J&Bryt 7~
·grossed-up monetary value of the fringe benefit and the fringe ben~fit
tax, respectively? · · . . •
a. P1 ,764,-706'; P564,706 c. P1 ,230,769; P430,769
: ·• b.. P1 ,470,588; P470 ;588 d. P800,000; P256,000 .
. .
. 36. _Assume the ·e mployer purchases the .car in installment in the name of
· · the employee. . At what amount should the employer repo_rt as the
gtossed.:.up monetary val4e of the_fringe benefit and the fringe benefit
tax, respectively? ·
a. -P1,470,588; P4 70,588 c. P130,000; P45,500
b. P1 ,000"000; P320,000 d. P200,000; 64,000

DE ·MINIMIS BENEFITS t

37 : Statement 1: : De minimis benefits are Facilities or privileges furnished

or offered by an employer to his· employees that are of relati~ely small
value and are offered or furnished by-,the e~ployer merely as a means
of. promo~ing the · health, goodwill, confentm~nt, or efficiency of his
employees. · ·
Statement -2: De Minimis benefit given to rank and file. employees or
tO' -managerial or . supervisory · employees _are not subje~t to final
withholding tax for fringe benefit and creditable withholding tax.
a. Statements 1 and 2 are false .•
b. s ·tatement 1·is true but statement 2 is false
c. Statement 1 is· false but statement 2 is frue
.d. · Statements 1 and 2 are tr~e

38. Alpha Company grants grocery allowance of PS,000 per semester per
employee payable every June ·30 a'nd December 31 based · on the
existing Comprehensrve Agreement wit.h its employees. The benefit
granted is: · ·
a. Exempt from basic income tax but subJect to 10% creditable
·.withholding tax. · . ·
b. Exempt from basic in_
C0fT1e tax and to creditable withholding
tax · ·
c. Subject _to fringe ~enefit tax if th.e recipient is a rank and file
employee · ·
d. Su~jec! ~o fringe benefit tax if the recipient is a managerial
employee

·3 9,_ Fixed daily me~I allowances granted_employees are

a. Exempt from income tax ··
b. Su_
bject to fringe benefit tax if the reclpient is a rank and file
employee .

'186
 . ·c£r, Eura&e.s - Fr!:f ~~ Ttrt
&

c. Subject to fringe benefit tax if the recipient is a managerial

employee · . ·
d. Subject to basic income ta.x regardless of employee's.rank
I

40. Statement 1: ~ Un.lforms and .clothing allowance not ex~eeding six

tho.usand pesos .(P6,000) per annum is an exempt de rhinimis benefit.
Statem~nt 2: - (\ctual medical benefits not exceeding P10,000 per
annum 1s an exempt de minimis benefit. ,
a. Statements 1and •2 are false
b. Statement 1 is true bu·t statement 2 is false·
c. Statement 1 is false but statement 2 i·s true
ct·. Statements. 1 and 2 are true

41 ; Other benefits receiv·ed by emplqyees from an employer which ar~ n'ot ,

. in the list of de minimis benefits under RR 8-2012, as amended, are.:·
. a. Treated as de minimis if the benefits · 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. · .
b. · Treated as· de minimis, regardless of the value, if such benefits
are offered or furnished by the employer merely as· a means of
promoting the health, 9.oodwill, contentment, or efficiency of
his .employees. .
· c. Not de minimis benefits because the list as provided in the
regulations .are all inclusive .
.d. None of the above

·42. Reasonable business expenses which are paid for by the employer for
the foreign travel ,of his employee to attend business meetings or
· conventions are not taxable as fringe benefits. Which is NOT true?
I. Inland travel expenses (food, -beverages, and local . .
tr~nsportatlon) e~cept lodging cost in a hotel or ·similar
establishment amounting to an average of US$300 or less per
day, shall not be subject to a fringe benefit tax. -
11. .The c.ost -of economy and business class airplane ticket shall
not,be subject to a fri'nge benefit tax. However, 30% of the
cost of first clas? airline ticket shall be subject to a fringe
benefit tax. . .
·Ill. · The expenses ·sho'uld be supported by oocuments proving the
actual occ·urrences of the meetings or conventions, otherwise,
they shall be treated taxaole fringe benefit.
. a. I only c. I , II and Ill .
b. I and Honly d. None of the above

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 c',t« £errMa h!:f Beyt ~
&

43. 1st Statement - Rice subsidy of two thqµsand pesos (P.2,000) or one
sack of 50 kg. rice per . month amounting ~o not -more than two
thousand pesos is an exempt de minimis benefit. .
2nd Statement - Employee achievement awa~ds, e.g., for length of
service, or safety achievement, which must be in the form of a tangible
personal property other than cash or gift certificate, with. an annual
monetary value not exqeeding teri thousand pesos r~ce1ved by an
employee under an established written plan which does not
discriminate in favor of ~ighly -paid employees is an exempt de minimis
benefit. .
a. Statements 1 and 2 are fals~
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true ·

44. The amount of de minimis benefits conforming to .the celling of de

minimis benefits shall be:
a. Exempt · from income tax, regardless ·of the rank of the
employe_ e .
b. Not be considered in determining the P90,000 ceiling of other
benefits excluded from the gross income under· the Code, as
amended. ·
c. Both "a" and "b"
· d. Neither "a'' nor "b"

45. The excess of the de minimis benefits over their respective ceili ngs
prescrib~d under the regulations shall be
a. _Considered as part of other benefits subject to tax only on the
excess over the P90,000 ceiling.
b. Not b~ consi~er~d in determining the P82,000 ceiling of other
bene.flts excluded from the gross income -under the Code, as
amended.
c. Both "a" and ''b"
d. Neither "a" nor "b"

46. Minimun Wage Earners (MWEs) receiving "other benefits" exceeding

the P90,000 limit shall be
a . . Taxable ·on .the excess benefits onfy .
b. Taxable on the excess benefits as well as his salaries, wages
~nd allo~ances, just like an employee receiving compensation
income beyond the statutory minimum wage.
• ed.. Exempt from income tax
None of the above

188
 . .. .. . .c',ter' £e:rtu&> _, h!:J&B~ T~
47 ..The amo_ unt of P9.0,000 under "other benefits" which are excluded
from gross i~ncome shall
I. Not be applicable to self-employed individuals.
11. Not be applicable to income generated from the conduct of
trade .or business. ·
111. · Shall be applicable to alf types of income
a. I only . c. I , 11 and Ill
I
b. I and II only
' ~
d. None of the above
•

48. "Other Benefits" under revenue regulations Include

I. · Christmas bonus
11. Productivity incentive bonus
111. Loyalty awards · ·
IV. Gifts in cash or in kind and other benefits of similar nature
actually received by officials and employees of both
government and .private offices
a. I only c. I , II and Ill
b. l_ .and Ill only d. · 1 , II, Ill and IV

49. Which of the ~allowing statements regarding thirteenth (13th ) month

- pay is correct?
a. Thirteent~ (13 th ) month pay and other benefits received by
officials ·and .employees of public and private entities are
exempt from income tax and creditable withholding tax on
compensation, provided that the total exclusion shall not
A

exceed P90,000.
b. The excess of de minimis benefits over the ceiling would form
part of an individual's gross income only if the total excess
be,nefits including bonuses exceeds P90,000 and would be
subject to income tax and applicable final withholding taxes .
c. Statements "a" and "b" are correct
d. Neither statement "a" nor "b" is correct

so. Pedro, single, is a minimum wage earner of EDT Manufacturing!

Corporation. In additio'n to his basic minimum wage of P1 44, 000 for
2020 taxable year, he also received the following benefits:
• Holiday pay, P25,000
■ Overtime pay, 12,000
■ Night shift differential, 19,000
The income subject to tax should be:
a. P56,000 c. P200,000
b. P31 ,000 d. nil

189
 6f« q;ermes -h:J&B ~ ~
51. Pedro, single, is ~ minimu~ wa~e e_a~ner of EDT Manufactu~ing
1

Corporation. In addition to his basic minimum wage of P144,000 for

2020, he also received the followi_ng benefits: ·. . ..
• De minimis, p60,000 (P20,000 over the ceiling)
■ 13 th month pay and other bene~its, P122,000

Pedro's income tax due should be:

a. P20,000 . c. .P52,000
b. P32,000 d. PO

52. Pedro, senior citizen, is a minimum wage earner of EDT

Manufacturing Corporation .. .Pedro is also engaged in trading various
constim~r products every weekend. He · derived profit therefrom
amounting to P500,000 'for 2020 taxable year. In addition to -his basic
minimum wag~ of P144,000 for 2020 taxable year, he likewise
received the following additional benefits from -his employer:
• De mif)imisi, P40,000' (all within .the ·ceiling) ·
■ . •1.3 month pay and other benefits, P35,000
th

Pedro's taxable income should be: .

a. P6.44,000 c. PS00,000
b. ,P594,000 d. P350,000

'

• I

I
r
. I·
(,

190