Chapter 11 - Fringe Benefit Tax

chapter 11 - Fringe Benefit Tax

c. Fringe benefits in the form of incentives are considered 13th montb pay and
CHAPTER 11 I other benefits.
d. Fringe benefits furnished for the employer's convenience or necessity are
FRINGE BENEFIT TAX exempt from income tax. ~l-1s n1e6-<S tKpeKlse

chapter Overview and Objectives Other fringe benefits . b fit t · I d d

As mentioned in the previous chapter, other fringe ene s no inc ~ e or
--------------------------------------------------------------------------------------~----------------- classifiable as items of compensation income and which are not exempte under
This chapter disc~sses fringe benefits of managerial and supervisory employees
subject to final fringe benefit tax and the procedural computations of the fringe . the law are treated as follows: .R ,, d "13th
1. For rank and file employees - included as "other bene.,.ts un er month
benefit tax.
pay and other benefits"
After this chapter, readers are expected to demonstrate: 2. For managerial and supervisory employees - excluded in compensation
1. Understanding of the nature of fringe benefits income and are subjected to final fringe benefit tax
2. Appreciation of the convenience of the employer rule and hybrid expense
3. Ability to distinguish exempt benefit, partially exempt, and fully taxable fringe SCOPE OF THE FRINGE BENEFIT TAX
benefits The fringe benefit tax covers only the taxable fringe benefits of managerial or
4. Understanding of the scope of the final fringe benefit tax supervisory employees.
5. Knowledge of the characteristics of fringe benefits tax For purposes of the fringe benefit tax, RR3-98 clarifies that taxable fringe benefits
6. Understanding of the procedures of fringe benefit tax computation exclude those items considered as compensation income. Hence, an excellent
7. Comprehension of the general rules on monetary value understanding of the items of compensation income is extremely important in
8. Comprehension on monetary value rules as applied to actual scenarios highlighting the bounds between compensation income and the fringe benefits
9. Mastery of the procedures for the computation of the fringe benefit tax subject to fringe benefit tax.
10. Knowledge of the list of exempt fringe benefits
GENERAL CATEGORIES OF FRINGE BENEFITS SUBJECT TO FINAL TAX
FRINGE BENEFITS 1. Management perquisite benefits
Under labor laws, fringe benefits pertain to all other benefits or incentives of 2. Employee personal expenses shouldered by the employer
employees other than the basic pay. The basic pay is the fixed regular salary or 3. Taxable de minimis benefits
wages of employees every payroll period. a. Excess de minimis over their limits
b. Benefits not included in the de minimis list
Under the NIRC, the term "fringe benefit'' was defined to pertain to goods, services
or other benefits furnished by the employer to the employees. Management perquisite benefits
~erquisite benefits, al_so called "management perks" are highly privileged incentives
Tax treatments of fringe benefits . . given only to a special group of employees. These benefits are non-performance
Under current tax rules, however, items of fringe benefits m the stnct sense are based and are given as incentives to management employees. Perquisite benefits I
treated differently depending on their nature: are not considered as compensation income, but as fringe benefits subject to
fringe benefit tax.
For example: . ·d d regular
a. Fringe benefits that are fixed every payroll period are conSl ere
In practic~, t~e boundar~ between fringe benefits subject to final tax an~
compensation.
compensat10n mcome subJect to regular tax sometimes overlaps. Based on pas ,
For example: Fixed transportation allowance . rulings, however, the BIR seemed to maintain the view that performance-based
. · ./'. mance-based are considered benefits are compensation income while benefits in the nature of incentive or
b. Fringe benefits that are variable and per,or
supplemental compensation. perks are fringe benefits.
. .
For example: comm1ss10n, pro fit
1 s h a ring and overtime pay 380
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chapter 11- Fringe Benefit Tax
<I I
As .a safety hnet, it is therefo re b est recommended for taxpayers to secur~ BIR
rubngs 0 ~ t e proper treatment of income in thei~ compensation plans to avoid
inconvemence.
Employee personal expenses . 1
, The BIR opined that only 10% o[ the monthly rental is taxa?le as fringe benefit sine
When ~n expen~e ~kes the nature of an employee ~expense or
exp~nditure an~ Is. P~•d or assumed by the employer in default o a proximate
busme_ss ne~essity, It Is deemed a fringe benefit in its entirety ev~n if the expense
is receipted 1n the name of the employer.
Illustration , laws
Mr. Lakewood, a managerial expatriate employee, was granted by his employer a
P30,000 monthly housing allowance .in addition to his regular salary. The actual
monthly rent of Mr. Lakewood's residence is P2 5,000. ·
The P25,000 personal expense assumed by the employer constitutes a taxable fringe
benefit subject to fringe benefit tax. The monthly fixed PS,000 excess is a taxable
additional compensation. (BIR Ruling No. 512-2011)
Hybrid expenses
When the employer incurs expenses _whj.f!!_ is purported partly for business and
partly for employee's incentive, ;qnly 50%') of the expense representing the
employee incentive 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 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 an employee free use of business property
When the employer allows its emplo~ee to use business proper~ies, the rent~l
value or depreciation value of the busm~ss property over the period of usage 1s
deemed half business expense and half frmge benefit to the employee.
Illustration 1 . l. Scholarship program for an employee to study and acquire competence for future
The University of Caceres pays for the PS0,000 monthly rental of the residential unit
of its President.
The amount of taxable fringe benefits shall be P25,000 computed as 50% x PS0,000.
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Chapter 11 - Fringe Benefit Tax
. . Illustration 2
A 'manufacturer and distributor of consumer products all over the Philippines 1
cars and other vehicles for the use of its employees. The company requires empl eases
to share at least 40% of the monthly rental deductible through their payroll Whi~?;~:
company books the 60% as rent expense.
employees shouldered 40% of their 50% counterpart {BIR Ru/mg No. 009-2000) e
I
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
Examples: Employer's contribution to SSS, PhilHealth, HDMF or group insurance,
except excess over the mandatory amounts set by law
2. 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 retiremeni
insurance and hospitalization benefit plans
S. Benefit given to rank and file employees whether or not granted under a
collective bargaining agreement
The taxa le 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.
6. De minimis benefits within their legal limits
"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 employer's convenience or
advantage, it is an ordinary business expense. The personal advantage of the
employee is merely incidental to the expense. These fringe benefits are not viewed
as taxable fringe benefits under the NIRC .
.Examples of exempt benefits under this rule:
use of the business
2· Car incentives to medical doctors so they will be available for duty anytime
3· Free_transpQrtation services to employees working at di t~nt facilities ff :
4· Mobile_ pho~e allowance to corporate secretarie who are required to handle 0
duty chent inquiries
5· Sleeping quarters to field engineers and staffs working on remote facilities
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chapter 11 - Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax

6. Helicopters assigned to fishing employees for locating schools of fish offshore or 2. Tax upon the fringe benefits of managerial or supervisory employees
to mining engineers for mineral exploration purposes The fringe benefit tax is not a t~x to the em~loyer. It is a tax u~on the fringe
7. Pers?~al _aircraft to a chief executive officer managing business affiliates and benefit realized by the managerial or supervisory employee. It 1s a tax to the
subs1d1anes spread across different countries employee; hence, it applies regardless of the identity of the employer.
8. Car incentive to a travelling company salesman
Therefore, it applies even if the employer is a sole proprietor, partnership,
corporation whether taxable or exempt, or the government.
9. Sleeping quarters near the camp furnished to military personnel so they will be
available for duty at any time of insurgency 3. Paid by the employer
10. Housing units for an employee and his family near the employer's place of As a final tax, the tax is presumed withheld at source and remitted by the
business to ensure the employee's availability anytime when the employer needs employer to the government.
him
4. Grossed-up tax
THE FRINGE BENEFIT 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
The fringe benefit tax is a final tax imposed on the fringe benefit furnished, granted source. Hence, the monetary value is first grossed-up by the complement
or paid by the employer to the employee, except rank and file employees, whether percentage of the applicable fringe benefit tax rate before the fringe benefit
such employer is an individual, a professional partnership or a corporation, tax rate is applied.
regardless of whether the corporation is taxable or not, or the government and its
instrumentalities. 5. Due quarterly
The fringe benefit tax is due for remittance quarterly based on the accounting
For the purposes of the fringe benefit tax, fringe benefit means any good, service, period (fiscal or calendar) selected by the employer. The monetary value of
or other benefits furnished or granted in cash or ,in kind by the employer to each taxable fringe benefit is determined and reported quarterly through BIR
individual employees (except rank and file employees) such as, but not limited to, Form 1603Q.
the following:
The quarterly fringe benefit tax is due on or before the last day of the month
1. Housing benefits following the quarter in which withholding was made.
2. Expense account
3. Vehicles of any kind PROCEDURES IN COMPUTING THE FRINGE BENEFIT TAX
4. Household personnel, such as maid, driver or others 1. Determine the monetary value.
5. Interest, for the difference between the market rate (12%) and the actual Monetary value refers to the taxable amount of benefits taken home or realized by
interest granted the managerial or supervisory employee. The monetary value is presumed net of
6. Membership fees, dues and other expenses borne by the employer for the the final tax.
employee in social and athletic clubs or other similar organizations
2. Determine the gross-up rate and fringe benefit tax rate applicable for tbe
7. Expense for foreign travel
taxpayer.
8. Holiday and vacation expenses
9. Educational assistance to the employee or his dependents The gross up rate is the complement of the fringe benefit tax rate. If the fringe benefit
10. Life or health and other non-life insurance premiums or similar accounts tax rate is 35%, the gross-up rate is (100% less 35%) or 65%. If the fringe benefit tt
in excess of what the law allows rate is 25%, the gross-up rate is 75%.
3. Determine the grossed-up monetary value by dividing th
CHARACTERISTICS OF THE FRINGE BENEFIT TAX the gross-up rate.
1. Final tax 4 · Determine the fringe benefit tax by multiplying the fring b n fit t ' rate to
The fringe benefit tax is a final tax which is withheld by the_ em_Pl?yer at the grossed-up monetary value.
source. Thus, the employee need not report the fringe benefits m his mcome
tax return. 384
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 er 11 - Fringe Benefit Tax Chapter 11 _ Fringe Benefit Tax
chaPt
OLESON VALUATION OF FRINGE BENEFITS . movable such as a car or other motor vehicles, the an
2· If th e ~r~pertyl is shall be P400 000 computed as P2,000,000 x 20%. nua1
R Benefits pa1"d.10 cash deprec1at10n va ue '
1 rting for the fringe benefit tax, the quarterly monetary valu .
' When benefit is given in cash or paid for in cash, the monetary value is the In quarterly repo e is
amount paid for in cash. determined by dividing the annual value by 4.
Note: The only exception here is when the employer pays for the rent of the residence of the SPECIAL GUIDELINES ON MONETARY VALUE DETERMINATION
employee. Monetary value is 50% of the rental payment.

2. Benefits paid in kind Taxable Housing Benefits .

When benefit is given in kind, the monetary value is the fair value of the thing 1. Employer leases a residential property for the use of his employee and the said
given unless its book value is higher. Book value is the cost less any provision property is the usual residence of the employee.
for depreciation for depreciable properties. ·
Monetary value= 50% of the benefit
l-ev\bt I IA s-e
Simply stated, the monetary value is the fair value or the book value of the Ulustration
thing given, whichever is higher. A sole proprietorship business leases a residential house and lot for the use of his
When ownership over the property is transferred to the employee, the business manager for P20,000/month.
monetary value is the entire fair value of the property even if the property is
The monetary value shall be:
partially used in the business of the employer.
Quarterly value = (P20,000 x 3 months) = P 60,000
3. Benefits that are furnished Quarterly monetary value= P 60,000 x 50% = P 30,000
When the benefit is given in the form of free use of the employer's property,
2. Employer owns a residential property and assigns the same for the use of his
the monetary value is 50% of the rental value of the property. If the property
employee as his usual place of residence; the annual value of the benefit is 5% of
has no available rental value, th~-~~precia_tion _va~ue is ~-s :~; _~ _lf)t1''i0f'...-:::i..") whichever is higher of the zonal or assessed value of the land and improvement.
(_,v,E/,;-__, ~10•11,., I {, · , , nv \! ~ , ...,~
For purposes of the depreciation value, the presumptive useful lives of the Monetary value = 50% of the annual value of the benefit
property are:
Illustration D;i,.Jt\,) V1.SG
a. 20 years for real properties.
Chamberly, Inc. allowed one of its unused realty investment costing P3,S00,000
Hence, the depreciation value is computed as 1/20 or 5% of the value of with zonal value of P4,000,000 and assessed value of P3,000,000 to be used by its
the property. vice president.
b. 5 years for movable properties. The monetary value shall be determined as follows:
Hence, the depreciation value is computed as 1/5 or 20% of the value of Annual depreciation value= P4,000,000 x 5% P 200,000
the property. Quarterly value= P200,000/4 quarters P 50,000
Quarterly monetary value = PS0,0.00 x 50% P 25,000
Since the fringe benefit tax is paid quarterly, the valuation and reporting of
monetary value is also done quarterly. In case of use of employer properties, the 3· T~e employer purchases a residential property on installment basis and allo~s
reporting of monetary value ceases from the month the free use is discontinued. his employee to use the same as his usual place of residence; the annual value 15
So/o or 1120 of th e acquisition cost, exclusive of interest.
Illustration: Determination of depreciation value Monetary value = SO% of the annual value of the benefit
APartnership transferred the use of a property with a fair value of P2,000,000 to its
supervisor. This is the same with No. 2 except that the basis is the purchase price of the pro perty•
'I'h pl/\rcJ\fA5-e / ~St
Illustration
1 e annual depreciation value shall be: . . . . .
· If the property is an immovable such as a res1dent1a~umt, the annual deprec1at1on Cotabato Corporat" h f •ts rnanager•
Value shall be Pl00,000 computed as PZ,000,000 x 5 1/o.
Th . ion pure ased a residential property for the use o 1 . 1 dillg
e property is payable over 11 annual installments of P200,000 inc u
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 chapter 11 - Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax
. terests but have a cash pric O f pz
in . . . e ,000,000. For accounting purposes, Cotabato 3. Temporary housing for an employee in a housing unit for 3 months or 1ess (I
corporation ~td to capitahze the interest and recorded the PZ,200,000 contract not exceeding one quarter) -e.,
price as acqms1t10n cost of the property.
Expense Account . , .
The monetary value shall be determined as follows: Expenses incurred by an employee but which are paid by his employer or incurre
Annual depreciation value= P2,000,000 x 5% and paid by employee but reimbursed or advanced by the employer are taXab d
P 100,000
Quarterly value= Pl00,000/4 quarters P 25,000 fringe benefits. The monetary value is the amount paid by the employer. le
Quarterly monetary value= P25,000 x 50% P 12.500 Properly documented employer expense
Note: The purchase price is the cost net of interest When the expense is receipted for and in the name of the employer and th
expenditure does not partake_ of the nature of a p~r~onal e~pense attributable to th:
4. Purchase by the employer of residential property and transfer of ownership in the employee, it is not a taxable frmge benefit because 1t 1s a busmess expense.
name of the employee, the value of the benefit is whichever is higher of the Personal expenses of the employee such as groceries for the personal consumption of
acquisition cost or zonal value f \,\V--GWJ\se / --pC\ Vl q:-er the employee and/or his family, if paid or reimbursed by the employer, are taxable
Monetary value = 100% of the value of the benefit fringe benefits whether or not receipted in the name of the employer.
Illustration Fixed and regular RATA are treated as part of regular compensation income and are
A non-profit corporation bought a residential dwelling for PS,000,000 and subject to creditable withholding taxes, not to fringe benefit tax.
transferred ownership to its president. The property has P3,000,000 zonal value.
Illustration
Since there is transfer of ownership, the monetary value is the entire PS,000,000, Denver Corporation paid for the following expenses which were liquidated by its
the higher of book value (i.e. cost in this case) and zonal value. managerial employee: ,
5. Purchase by employer of property and transfer of title to employee for less than Water and electricity bill at manager's home P 15,000
adequate consideration, the value is [(fair m·a rket value or zonal value, whichever Meals and groceries at manager's home 18,000
is higher) less consideration paid by employee t
tJ.iLl (f;·r;C, -J ctn~ \ ~/
X Bill on business telephone 2,000
Monetary value = 100% of the value of the benefit cc i 1S 1 e, ;: t · -, Bill on personal phone 1,000
X. Transportation from office to and from clients 12,000
Illustration
Denzy, a professional practitioner, transferred his residential property in the Transportation from office to and from manager's home 10,000
name of his managerial employee for P2,000,000. The property has fair value per Xfoods and beverages for visiting business clients 8,000
tax declaration of P3,400,000 and PS,000,000 zonal value.
The monetary value of fringe benefits shall be computed as follows:
Since there is a transfer of ownership (i.e. title), the monetary value is P3,000,000,
computed as PS,000,000 zonal value less the P2,000,000 consideration paid. Water and electricity bill at director's home P 15,000
Meals and groceries at director's home 18,000
Exempt housing privileges: Bill on personal phone 1,000
1. Military officials of the Armed Forces of the Philippines (AFP), Philippine Air Transportation from office to and from home 10,000
Force (PAF), Philippine Army, and Philippine Navy on their quarters which are Total monetary value
P 44.000
Within or accessible from the military camp so they can be readily available on call
to meet the exigencies of their military service. ~o~: Business _telephone bills, office to client transportation, and food and beverages for client
2 v1s1tors are business expenses, not fringe benefits to the manager.
· Housing unit situated or adjacent to the premises of a business or factory (within
a rnaximum of so meters) from the perimeter of the business premises. Motor Vehicles of Any Kind .
The SO-meter rule may be relaxed when upon the basis of health or safety 1· Purchase by empl~yer of motor vehicle in the name of the employee regardless 01
requirements such as in the case of chemical manufacturing, the housing needs to ;heth er the same•~ used partially in the business of the employer
be located at a farther location. onetary value= 100% of the cost of the motor vehicle
f\/11/tN!i 1-r- v-(1,j(\5rex-•
387
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 ter 11- Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax
chaP
Note that the monetary value shall be reported in
. It mu~t be noted that becau~e of the inherent difficulty of tracing the realization 0
the quarter of purchase. the frmge benefits to a particular employee considering the collective enjoYlll f
cash benefit to employee for the purchase . . . . of the benefit by the employees (managerial, supervisory, or possibly incluct~nt
2. d ·n the business of the of a vehicle, even if the vehicle is partly
use I emp IOyer (A rri_, ~ l ~ Jv rank and file alike), the regulations simply subjected it to the final fringe be Ing
Monetary value = 100% of the cash b ~ J - • • ~ . ~
to withholding tax on compensation ene t, except when the amount 1s subjected
6. Fleet of motor vehicles leased for the use of the business and the employee, th
Car benefits.
that are paid in
.
h
cas and are subjected to withholding tax on
ensatwn are subject to reyul t · . • value of the benefits is the rental payments for motor vehicles not normally use~
co mp h ar ax, not to frmge benefit tax If subject to fringe for sales, freight, delivery, service, and other non-personal use
benefit tax, t e monetary value shall be reported in the quarter oj payment
Monetary value= 50% of the value of the benefit ki~t J ¼S't
3. Purchase of car on installment
. · by t h e employer with
bas1s • ownership
• placed m ·
f
the name 0 th e emplo;:e_e _even if the car is used partly for the employer's business, 7. Aircrafts including helicopters are deemed solely for business use; hence, they are
s
the benefit 1s the acqms1t1on cost divided by years ..1 not subject to fringe benefit tax.
?~ m mf:to.Unte,.v\ 1/
Monetary value= (1/5) or 20% of the acquisition cost 8. Yachts whether owned and maintained or leased by the employer are presumed
410J\Syer
mustration not for business use; hence, taxable as fringe benefits. If owned or maintained, the
An employer purchased a car for Pl,000,000 payable in four installments plus value of the benefit is measured as the depreciation value over 20 years.
10% interest on the outstanding unpaid balance of the car.
Illustration
The entire acquisition cost shall be recognized as monetary value since there is Assume a corporation acquired a Pl0,000,000 yacht for the use of its executives.
transfer of ownership but the regulation requires amortization over 5 years. Hence,
the employer shall recognize Pl,000,000/5 or P200,000 monetary value annually for The monetary value shall be determined as:
five years. For every quarter, the employer shall report P200,000/4 or PS0,000
monetary value until the cost is fully reported over 5 years. Annual depreciation value =·Pl0,000,000/20 P 500,000
Quarterly monetary value= PS00,000/4 P 125,000
4. Employer shoulders a portjon and is placed in the name of the employee, even if
partially used in business A yacht is considered immovable by virtue of the fact that it is fixed and cannot be
Monetary value = the portion shouldered by the employer removed from water. Hence, the 20-year presumptive useful life for real
properties is used. If this is leased, the entire rental ayment is the monetary
Illustration value. Note that the SO% rule is not applied by the regulation.
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 Supposing the yacht is purchased and transferred to the name of the executive,
managerial employee. the monetary value shall be the entire Pl0,000,000.
The monetary value shall be Pl,600,000 computed as P4,000,000 x 40%
representing the portion shouldered by the employer. This will be reported in the Note on aircrafts and yachts
quarter the employer's share is paid. The high cost of ownership of aircrafts makes it inherently prohibitive or impractical
to be for personal use. Thus, aircrafts are deemed by the regulation a ol I for
5. Fleet of motor vehicles owned for the use of the business and the employees, the business use; hence, they are exempt from fri nge benefit tax. Yachts, though pricey on
value of benefit is the cost of all motor vehicles not used for sales, freight, delivery the other hand, generally lack any sensible busines purpo ide from b ing for
service, and other non-personal uses divided by 5 years Ot\ln ~ VS persona] pleasure; hence, its depreciation value is subject to fring b nefit t in full.
Monetary value= SO% of the value of benefit
. . p~ti~
It should be noted that the cost of motor vehicles not used in business is Exceptionally, if the yacht 1s used sol ely or the entertamment of gu t or_p~os f the
arnortized over 5 years. There being no transfer of titl~,. 50% of the benefit is clients, it is not subj ect to the fringe benefi t t x. In thi ~as , th d:prec1atwn °
recognizable as monetary value. The quarterly recogmt10n of monetary value yacht qualifies as "entertainment, amusement, und recreatwn expense .
continues until the free usage is terminated.

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 Chapter 11 - Fringe Benefit Tax
chapter 11 - Fringe Benefit Tax Note that 30% of the cost of first-class ticket in foreign travels is considered de-
ffousebold Expenses . 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,
Employee expenses borne by the e 1
d help personal d . mp oyer for household personnel, salaries of
hous ehol ' river of the e I Substantiation requirement
h as homeowners associ· t· d mp oyee, and other personal expenses The above rules apply if the expenses were supported by documentations proving
sue ble fringe benefits The a 10n ues ' garb age d ues, electnc1ty,
· · an d water are
taxa · monetary value is the amount paid. the actual occurrences of the meeting or convention; otherwise, they shall be
subject to fringe benefit tax.
1Hustration
Business meetings must be supported by an official communication from business
Henesy Corporation granted the ~ 0 11 owmg
· benefits to a managerial employee:
associates abroad indicating the purpose of the meeting.
Salary of household personnel Business conventions must be supported by an official invitation or communication
P12,000/month
Salary of personal driver from the host organization or entity abroad.
10,000/month
Home owner's association dues 4,000/year Expenses for the family members of the employee shouldered by the employer are
taxable fringe benefits in full.
The quarterly monetary value of the benefit shall be determined as follows:
Salary of household personnel p 12,000 X 3 P 36,000 Illustration
Salary of personal driver p 10,000 X 3 30,000 Zubiri, Inc. allowed its VP Finance, Mr. Gonzales, to attend a convention abroad with
Home owner's association dues* P 4,000/4 1,000 the privilege to bring his wife. The expenses of the foreign travel were:
P 67,000
Note: A year is composed of 4 quarters. Mr. Gonzales
-=-=.:...==="'-=---- Mrs. Gonzales Total
First class plane ticket P 70,000 P 70,000 P 140,000
Interest on Loan at Less than Market Rate Lodging cost* 91,000 91,000 182,000
The interest forgone by the employer representing the difference between 12% Foods & inland transportation_~S~0. . .0~0~0
. 50,000 100,000
and the actual interest charged is a taxable fringe benefit. P 211.000 P 211.000 P 422,000
*The applicable exchange rate is P52:$1; P52 x $350 x 5 days each to Mr. and Mrs. Gonzales
lllustrati on
Europa Cooperative lent its chief executive officer Pl,000,000 at a minimal 3% annual The monetary value shall be determined as follows:
interest rate. The monetary value shall be computed as follows:
Items Remarks Amount
Annual monetary value= (12% - 3%) x Pl,000,000 P 90,000 First class plane ticket:
Quarterly monetary values= P 90,000/4 P 22,500 Mr. Gonzales P70,000 x 30% p 21,000
Mr s. Gonzales P70,000 x 100% 70,000
.Membership fees, dues, and other expenses borne by the employer for his
Lodging costs:
employees in social and athletic clubs or other similar organizations
Mr. Gonzales ($350-$300) x P5 2 x 5 13,000
constitute taxable fringe benefits. The monetary value is the amount paid.
Mrs. Gonzales Fully taxable 91,000
Foods and local transportation
Expenses for Foreign Travel Mr. Gonzales Exempt de minimis 0
Reasonable business expenses for foreign travel for attending business meetings Mrs. Gonzales Fully taxable SQ,QQQ
and conventions are exempt, such as the following: Total monetary value p 245,000
l. Inland travel expenses such as food, beve~age, and local tr~nsportation costs
2· lodging costs in hotel or similar estabhshment amountmg to an average of Holiday and Vacation Expenses
$300 Iday or less. Holiday and vacation expenses are taxable fringe benefits if shouldered by thE
3· Economy and business class airplane tickets
employer. The monetary value is th e amount paid or shouldered by the employer.
4· 70% of the cost offirst-class ticket
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 chapter 11 - Fringe Benefit Tax
Chapter 11 - Fringe Benefit Tax
f;duca~onal As~istance to the Employee or his Dependents
fducattonal assIS t ance to the employee is generally taxable except when it is
incurred for the convenience or furtherance of the employer's business, such as: Illustration .
1. the education or study is directly connected with the employer's trade,
Queensdale Company made the following insurance premium payments during a
business or profession; and calendar quarter:
P30,000 premium for the life fosurance of the Chief Executive Officer (CEO) With
2. there is a written contract (i.e., employee bond) that the employee is under
obligation to remain at the employ of the employer for a period of time they Queensdale Company as the beneficiary of the policy
mutually agreed upon. P20,000 premium for the life insurance of the Company Chief Operating Officer
(COO) with his wife as the beneficiary ·
Educational assist~nce granted to dependents of the employee is generally taxable PlS,000 insurance premium of the personal car of the company manager
except when the assistance was provided through a competitive scheme under a P40,000 premium for group insurance of employees
scholarship program of the company. P80,000 premium share in SSS, PhilHealth, and Pag-Ibig dues of employees
Pl0,000 fire insurance premium for the company building
Illustration
Dianne Marketing, a distributor of cosmetics products, provides educational The quarterly monetary value of fringe benefits shall be computed as follows:
assistance to the following employees under an employment bond:
Life insurance premium of COO where his wife
is the beneficiary p 20,000
Amount per
Car insurance of company manager 15,000
Position Field of study semester
Quarterly monetary value p 35.000
VP for Management Doctor in Business
Administration P 50,000
Note:
VP for Marketing Master in Marketing 1. The insurance premium on the life of the CEO where the company itself is the beneficiary is
Management 35,000 not a fringe benefit to the executive employe~ but a business expense.
Operations manager BS Cosmetology 25,000 2. Group insurance premiums and those required by special laws are not taxable.
Accounting supervisor BS Criminology 24,000 3. The premium for fire insurance on company building is a business expense.
Accounting staff BS Accountancy 20,000
FRINGE BENEFIT TAX RATES
Only the tuition fee of the accounting supervisor is subject to fringe benefit tax and
shall be reported in the quarters it is paid. Even if covered PY an employee bond, his The fringe benefit tax rates are as follows:
field of study is neither related to the nature of his job nor to the employer's business.
The fringe benefit of all the other employees will neither be subject to the fringe Employees
benefit tax nor the regular income tax under the "convenience of the employer" rule. Year Residents or citizens* Non-resident aliens
1998 34%
Life or health insurance and other non-life insurance premiums or similar 1999 33% 25%
2000 to 2017 32%
amounts in excess of what the law allows ;

2018 and thereafter 35%

These are taxable fringe benefits except the following insurance or premium
contributions allowed or required by law:
1. Contributions of the employer for the benefit of the employee pu~suant to the
provisions of existing law such as contributions to SSS, GSIS, Ph1IHealth, and
HDMF
2· Cost of premium for group insurance of employees
393
*Includes resident citizens, non -resident citizens, and resident aliens
GROSSED-UP MONETARY VALUE
The basis of the fringe benefit tax is the grossed-up monetary value of the fringe
benefit The grossed-up monetary value is the monetary value of benefits divided
by the appropriate grossed-up rate for the employee. The grossed-up monetary
value is inclusive of the fringe benefit tax.
The following are the grossed-up rate:
394
chapter 11 - Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax

Illustration 2: Non-resident alien

'Vear On January 202~ . bers~ace Company purcllased _a P3,000,000 car and designated it
ReSldents or citizens• Non-reslde~t aliens
1998 66% . . for the persona us of its non-resident alien executive.
1999 Monetary value ( 3,000,000/5) x 50% P 300,000 -
67% 7S%
2000 to 2017 68% Quarterly monetary value (P300,000/4) P 75.000
zoiBandthere . er
The fringe benefits tax shall be computed as P75,000 x 25%/75% = P 25,000.
mustration Note: The fringe benefit tax continues to be payable for as long as the employee uses the
Assume a~. employer g~ants fringe benefits with monetary value of P58~500 to a property for personal use and/or business use.
resident citizen managerial employee. r
ACCOUNTING ENTRIES
The grossed-up monetary value is computed as PSB,500/65% = P 90,00(1 If the
Accounting entries shall be classified as follows: '
employee is a non-resident alien, the grossed-up monetary value shall be computed as
PSS,500/75% = P 78.000. 1. Taxable benefits paid for in cash or in kind
2. Taxable benefits which do not involve payment of cash or transfer of property
ILLUSTRATIONS: FRINGE BENEFIT TAX COMPUTATIONS 3. Exempt benefits paid for in cash or in kind
4. Exempt benefits which do not involve payment of cash or transfer of property
Dlustration 1: Resident citizen
In the last quarter of 2021, Alexander, a Filipino supervisory employee, was given Qenefits paid for in cash or in kind ,
P13,000 worth of groceries for personal use. Taxpayers shall record fringe benefits paid for in cash or in kind in their books as
follows:
Monetary value p 13,000
Divide by: Gross-up rate 65%, Fringe benefit expense (mone'tary value) XXX ,_, t-.

Grossed-up monetary value p 20,000 Fringe benefit tax expense XXX :),_ t'
...J
Multiply by: Fringe benefit tax rate 35% Cash/Tax basis of property given XXX
Fringe benefit tax p 7,000 Fringe benefit tax payable XXX
Alternatively, the fringe benefit tax can be directly computed as P13,000 x 35%/ 65 °/o. Illustration 1: Rental accommodation
Moon Corporation paid P91,000 for the ren~I of a housing unit for the use of its
mustration 2: Resident alien president.
An offshore banking unit (OBU) reimbursed the following personal expenses of its
Fringe benefit expense P 9t000
non-resident managerial employee during a calendar quarter:
Fringe benefit tax expense 24,500
Golf club membership dues - 100% in the Cash
P 91,000
name of the employer p 10,000 Fringe benefit tax payable '
24,500
Groceries - 50% in the name of the employer 24,000 Fringe benefit tax= (P91,000 x 50%) x 35%/65%
Home owners' association dues 5,000
Total p Illustr~tion 2: Transfer of ownership over properties
39,000
San ~ms Company transf~rred ow~ership over a newly acquired investment property J

The fringe benefits tax shall be computed as: P39,000 x 35%/ 65% = P 21,000. costmg Pl,200,000 as residence of its supervisory employee. The property has a zonal
value of Pl,300,000.
,
Note: Personal expenses are taxable fringe beneflfs in full ev n if they are receipted in fu ll or in Fringe benefit expense p 1 200 000
Part in the name of the employer. Fr~nge benefit tax expense {Pl .3M x 35%/65%)
1

700,000
In~estment property p 1,200,000
Frmge benefit tax payable 700,000
395 396
 Chapter 11 - Fringe Benefit Tax
chapter 11 - Fringe Benefit Tax
Exempt benefits which do not involved transfer of cash or property
senefits which do not involve payment of cash or properties
Taxpayers shall record fringe benefits without outflow of cash or properties in Illustration: Exempt free use of property . . . ·
their books as follows: . 11 . •ts plant manager to use a res1dent1al property nearby its process'
Blanga is a owmegthi e manager's close monitoring of the production processes ;hng
Fringe benefit expense (monetary value] xxx p ant to ensur . . h · e
Fringe benefit tax payable xxx rental value of the property is P4 0,000 a mont '

Illustration 1: Free Usage of Assets No entry is required.

Gutalac Inc. designated a unit of its condominium property for the use of its vice Integrated Illustration 1 . . . . .. _
president for finance as his family residence. The rental value of the, unit for the past Tagum Miners Marketing Cooperative (TMMC) fu~n1she,d its managerial employees a
calendar quarter would have been P260,000. car plan wherein HMMC will purc~ase ca~s of their cho1c~ worth Pl,300,000. 40% of
the purchase price will be deductible agamst future salaries of the employee. HMMc
Fringe benefit tax expense P 70,000
Fringe benefit tax payable P 70,000 purchased a car for its sales manager.
Fringe benefit tax= (P260,000 x 50%) x 35%/65% Advances to officers (Pl.3M x 40%) P 520,000
Fringe benefit expense (Pl.3M x 60%) 780,000
Note that the employer is not allowed to claim fringe benefit expense. A deductible
Fringe benefits tax expense (780K x 35%/65%) 420,000
expense needs to _be an actual outflow or depletion of resources. Anyway, the Pl,300,000
\..U Cash
employer can claim depreciation expense if the property is an ordinary asset. In case
Fringe benefits tax payable 420,000
of capital asset where no depreciation is allowable, fringe benefit tax rules shall not
inappropriately allow the claim of deduction. The rules of deductions will be explained Note: The fringe benefit is taxable even if provided by an exempt employer (i.e. cooperative, non-
in Chapter 13. profit or government agency) because the tax is imposed upon the employee not upon the employer.

Illustration 2: Interest free loans Integrated Illustration 2

Kalamansig, an oil exploration company, granted a Pl,000,000 interest-free loan to a Jose Abad Santos Residences Corporation transferred ownership over one of its
non-resident managerial employee. residential property inventories to its vice presidents a consideration of P450,000.
The property was acquired for P2,000,000 but has a fair value of P2,400,000 at date of
The following entry shall be made every quarter after the loan issue: transfer.
Fringe benefit tax expense P 10,000 The fringe benefits expense shall be measured at the actual cost of the property given
Fringe benefits tax payable P 10,000 by the employer but the fringe benefit tax shall be measured at the monetary value of
Fringe benefit tax= (Pl,000,000 x 12%/4) x 25%/75% the benefit (P2,400,000 fair value - P450,000 received).
Hence,
Note also that the interest expense is not recognized as a fringe benefit expense
because it is not an expense involving actual payment or transfer of roperties. Cash p 450,000
Fringe benefits expense (P2M - P450K) 1,550,000
Exempt benefits paid for in cash or in kind Fringe benefits tax expense 1,050,000
Th~ taxpayer shall record exempt fringe benefits paid in cash or in kind as follows: Inventory P2,000,000
Fringe benefit expense (monetary value) xxx Fringe benefits tax payable 1,050,000
Cash/Property given xxx (P2,400,000 - P450,000) x 35%/65%

Illustration: Exempt fringe benefits Tax Treatment 0 f th

The total f . e Total Fringe Benefit Expense ~
An employer paid P120,000 for the tuition fee of his supervisor who is taking an
deductibl rmge benefit expense including the fringe benefit tax expense is a l
advancement course in furth erance of the employer's business.
of his u:a~;c:~nse of the emp oyer against is gross income in the computation
Frin9e benefit expense P 120,000
exists only wh mc~me. It must be noted that a deductible fringe benefit expense
Cash P 120,000
the actual costen t e ben_efit is paid in cash or in kind. The expense is measured at : 1

or tax basis of consideration given as fringe benefits. .1

397
398
 chapter 11 - Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax
cffJ\PTl1R 11: SELF-TEST EXERCISES 4. The monetary value of benefits given in kind is 100% of the value of the prope
_..:;.--.=======~~---------- given. . .. . tty
Discussion Questions s. The monetary value of fringe benefits in t~e for.m of free usage of property is 50 3/r
1. Enumerate the components of taxable to . of the rental or depreciation value of the property. o

2 Discuss the general categories of·· fr' bmpensat1on income. 6 . Employee benefits are employee expense by nature that are paid by the employer
· mge enefits 7. When title over property is transferred, the monetary value is the fair value of th~
3· Discuss the two tax treatments of fr' b . ·
mge enef1ts property given.
4 What types of employee benefits b' ·
5·. Discuss the 50% rule on h b 'd are su Ject to the fringe benefit tax? a. When the employer leases a house and lot as the usual residence of the
Y n expenses. supervisory or managerial employee, the monetary value of the benefit is 50% of
6. What are the two. exceptions to the S0o/co rue.17
t th f the r ental payments.
7. Enumera e e rmge . benefits exempt from th e frmge . bene fiits tax.
9. Edu-cational assistance to the employee is exempt from fringe benefit tax if there is
8. Enumerate and discuss the characteristics of the fringe benefit tax. an employee bond and the study is related to the trade or business of the
9· Enumerate
. the procedures in computi'ng th e frmge
· bene fi1t tax.
taxpayer.
10. D_1scuss t~e general rules on monetary value. 10. Aircraft including helicopters are considered for business use and not subject to
11. L1_st the frmge benefit tax rates and grossed-up rates for each type of taxpayer. fringe benefit tax.
12. Discuss the accounting entries to record the fringe benefit expense and the fringe 11. The monetary value of benefit from loans at less than market rate shall be the
benefit tax expense.
difference between 12% and the actual rate charged.
12. Lodging costs on foreign travel is a taxable fringe benefit regardless of amount
True or False 1
13. 30% of first-class tickets in foreign travel is a taxable fringe benefit.
1. The fringe benefit tax is a creditable withholding tax presumed to have been
14. The expenses of family members of the employee shouldered by the employer
withheld at source by the employer from the fringe benefits of supervisory or
constitute taxable fringe benefit in full.
managerial employees . .
15. An employee expense receipted in the name of the employer is considered a
2. Rank and file employees may be subject to fringe benefit tax.
3. Fringe benefits are always subject to fringe benefit tax.
business expense of the employer.
4. The personal expenses of employees shouldered by the employer are fringe
benefits. Multiple Choice - Theory 1
5. Managerial or supervisory employees are subject to fringe benefit tax. 1. The fringe benefit tax by nature is a
6. The tax base of the fringe benefit tax is the grossed-up monetary value of the a. tax on passive income of managerial or supervisory employees.
fringe benefit. b. final tax.
7. The taxable fringe benefit subject to the fringe benefit tax is the excess of the de c. tax to the employer of managerial or supervisory employees.
minimis benefits over P90,000. d. tax to all employee on their fringe benefits.
8. Half of the benefits that are necessary to the trade of the employer's business are
subject to fringe benefit tax. 2. Which is not part of de minimis benefits?
9. Benefits in the form of properties transferred to the name of the employee are
a. Clothing allowance c. Monetized unused vacation leave credit
subject to fringe benefit tax in full.
10. Benefits provided by the employer for his convenience are exempt from fringe b. Actual medical benefits13 th d. month pay
benefit tax. 3. The de minimis benefits not exceeding their thresholds are
a. exempt from income tax. c. subject to regular ta .
True or False 2 . 0 b. subject to fringe benefit tax. d. deductions from gro sin ome.
· r·10n value of a movable property 1s 201/o of the value of the
1· Th e annua I d eprecia
4· S~lect the answer which more accurately complete th ta able
2 pTrhoperty. 1 d . r· value of a real property is presumed to be 10% of the
· e annua eprec1a 10n fringe benefit of a supervisory employee i
value of the property. . • a. subject to fringe benefit tax.
3, Th e monetary va Iue o f benefits given in cash 1s the cash paid.
b. subject to regular income tax as compensation income.
c. the total of 13 th month pay and other benefits not exceeding P90,000.
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400
 Chapter 11 - Fringe Benefit Tax
ter 11 - Fringe Benefit Tax
chaP 12. When fringe benefit is in the form of free use of personal properties, what
th
d. the total of 13 month pay and oth b . percentage of the depreciation value of the property is considered fringe ben~fits?
er eneftts exceeding P90,000. a. 5% c. 50% ·
. Who is subject to the fringe benefit tax?
5 b. 20% d. 100%
a. An employer
. 1 of rank and• file empl oyees
b, Managena . or supervisory employees
13. An employer transferred title over property to the employee. What percentage of
An employer of managerial or superviso
c. Rank and flle employees ry employees the benefit is considered for purposes of the fringe benefit tax?
d.
a. 100% C. 50%
b. 20% d.5%
6. Which of theset~te~s is subject to fringe benefit tax?
a. Compensa ion income of rank and file employees
b. Fringe benefits of rank and file employees 14. For purposes of computing the annual value of benefits involving the free use of
c. Fringe ben~fits_ of managerial or supervisory employees movable properties, what percentage of the value of property is used?
d. Compensation mcome of managerial or supervisory employees a. 5% c. 20%
b. 50% d. 100%>
7. Which is a correct statement?
a. The fringe benefit tax is a tax upon the expense of the employer. 15. For purposes of computing the annual value of benefits involving the free use of
b. The personal expenses of any employees paid by the employer are subject to immovable properties, what percentage of the value of property is used?
fringe benefits tax. a. 5% c.50%
c. The personal expenses of rank and file employees paid by the employer are b. 20°/o d. 100%
subject to fringe benefit tax.
d. The personal expenses of managerial or supervisory employee shouldered by Multiple Choice - Theory 2
the employer are subject to fringe benefit tax. 1. The free usage of which of the following items is exempt from fringe benefit tax?
a. Yacht c. Helicopter
8. As a rule, hybrid expenses are presumed
b. Car d. Residential unit
a. 50% fringe benefit. c. 50% de minimis benefits.
b. 100% fringe benefit. d. 100% legitimate business expense.
2. Which is not a characteristic of the fringe benefit tax?
a. A final tax c. Payable by the employer
9. Which of the following phrases is not an exemption criterion for purposes of the
b. An income tax d. Imposed upon the monetary value of benefits
fringe benefit tax?
a. Convenience of the employer 3. Which is correct with respect to the fringe benefit tax?
b. Necessary for the business of the employer a. It is due monthly and quarterly.
c. In furtherance of employee goodwill b. It is a tax upon the compensation income of employee.
d. For the furtherance of the employer's business c. It is a tax upon the fringe benefit of any employee.
d. Employees do not need to file income tax returns to report the fringe benefit.
10. What percentage of the depreciation value is considered fringe benefit in the free
. ?
usage of employer's real properties. 4. The actual value of benefits realized by the managerial or supervisory employee is ~
a. 5% C. 50% referred to as the I
b. 20% d. 100% a. monetary value. c. grossed-up monetary value. ~
11 \ATL • • • • h i m of free use of real properties, what percentage b. fair value. d. annual depreciation value. ~!
· ,vnen frmge benefit IS m t e or . f . benefit?
of the fair value of the property is considered rmge · 5. Which is not an exempt housing benefit?
a. 5% c. 50% a. Housing within SO meters from the perim eter of the employer's business
b. 20% d. 100% b. Housing benefit for four months
c. Military sleeping quarters
d. Temporary housing
401 402
chapter 11 - Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax
2. A supervisory employee has the following benefits:

6_ Which is not subject to fringe benefit tax? 13 th month pay and other benefits P 40,000
a. Personal expenses receipted . h . De minimis within their limits 35,000
employer m t e name of the employee paid by the Excess de minimis benefits 10,000
b. Employee personal expense r 1 d Other fringe benefits 40,000
the employer ece pte In the name of the employer paid by
Compute the amount of fringe benefits subject to the fringe benefit tax rate.
c. :xpensei5 of employees considered in furtherance of the employers business a. P 85,000 c. P 50,000 ·
d. ers1ona expense receipted in the name of the employee reimbursed by the b. P 76,923 d. P 73,259
emp oyer

1. What percentage of the fair value of the yacht is considered in measuring 3. An employer pays the Pl0,000 monthly residential rental of his managerial
depreciation value? employee. Compute the quarterly monetary value.
a. 50'-
10 c. 20%) a. PlS,000 c. P30,000
b. 10% d.50% b. Pl0,000 d. P40,000

8. Which is subject to fringe benefits tax? 4. ABC Company designated a residential property for the use of its managerial
a. Premiums of employee group insurance employee. The lot has zonal value of P3,500,000 and P2,000,000 value per tax
b. Expenses of business travels declaration. The assessed value on the improvement on the lot was Pl,500,000.
c. Housing for an employee to ensure his immediate availability The lot was purchased at a cost of P2,000,000. Compute the monetary value to be
d. Housing for the family members of an employee reported in the quarterly fringe benefit tax return.
a. p 250,QQQ C. p 62,500
9. To which of the following is the tax benefit rate is not applied? b. P125,000 d. P31,250
a The monetary value of the fringe benefit
b. The amount deductible by the employer from gross income 5. Kalibo Company purchased a residential unit for P3,000,000 and transferred
c. The gross-up monetary value of the fringe benefit ownership to its supervispry employee. The property has a zonal value of
P3,500,000. Compute-the monetary value.
d. Both accounts of the fringe benefit and the fringe benefit tax
a. P3,000,000 c. Pl,750,000
10. Which fringe benefit is subject to fringe benefit tax? b. P3,500,000 d. P 175,000
a If given for the convenience or advantage of the employee
6. Celebes, Inc. owns a residential property it acquired for P2,000,000. It transferred
b. Benefits given to rank and file employees
ownership thereto to its managerial employee for Pl,200,000 when its fair value
c. Those required by the nature of or necessary to the trade, business or
was P3,000,000. What is the monetary value of the benefit?
profession of the employer a. P 3,000,000 c. P 1,800,000
d. Contributions of the employer to retirement, insurance and hospitalization
b. P 2,000,000 d. P 800,000
benefit plans for the benefit of the employee
7. Tapas Corporation granted ownership of several housing units to the following
t.lultiple Choice - Problem: Part 1 employees on its foundation day:
1. Catarman Corporation designated two condominiu~ units for the use of its Name Position
supervisory employees with fair value and terms of residence as follows:
Property value
Mr. Magdiwang Accounting manager P 3,000,000
Mrs. Calatrava Marketing supervisor
a&reed Residence time Pt Qperty value 2,000,000
· 1 year P 4,000,000 Mr. Romblon Machine operator 1,500,000
Unit No. 1
3 months 3,000,000 Mrs. Sta. Fe Electrical staff 1,000,000
Unit No. 2
Compute the quarterly monetary values for the above.
a. P 4,000,000 c. Pl00,000
b. P 175,000 d. P25,000
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 chapter 11 - Fringe Benefit Tax
compute the total monetary value of all fringe benefi~. Chapter 11 - Fringe Benefit Tax
a. P7,SOO,OOO c. P 187,SOO Gasoline for transportation (1/2 for business) 8,000
b. PS,000,000 d. P 125,000 Office electricity, water, and telephone bills 12,000

8. Compute thfie total monetary value of housing benefits that are subject to the Compute the monetary value of fringe benefits.
fringe bene ts tax. a. P 55,000 c. P 19,000
a. P 6,500,000 c. p s,000,000 b. P 35,000 d. P 23,000
b. P 162,500 d. P 125,000 3. In the immediately preceding problem, what is the fringe benefit tax if the
managerial employee is a resident citizen?
Alabel Corporation has a production facility 10 kilometers away from town. To
a. P 25,882 c. P 8,941
promote the goodwill of its employees, it decided to construct housing units
b. P 16,471 d. P 10,231
within the compound of the facility. It also agreed to pay half of the household
rentals of employees, who did not Waht to transfer their families to the housing 4. Lebak bought a car worth P800,000 and registered it in the name of its
unit The following data relates to the quarter of grant: supervisory employee. It was agreed that the same will be used partially for the
Rank and file business of Lebak.
Company officers employees Compute the monetary value.
J
Value of housing unit P 1,000,000 a. P 400,000 c. P 80,000
P 3,000,000
Rental payments b. P 800,000 d. P 0
500,000 800,000
Compute the monetary value of benefits subject to fringe benefit tax. 5. In the immediately preceding problem, what is the fringe benefit tax assuming the
a. p 250,000 C. p 500,000
employee is a non-resident alien?
a. P 376,471 c. P 188,235
b. Pl, 500,000 d. P4,650,000
b. P 266,667 d. P 133,333
10. As part of its employee benefits plan, Malaybay Realty Corporation acquired a 6. Nabunturan Company grants its managerial employees the privilege to select a car
piece of residential lot worth PZ,000,000 for its Director of Finance and of their choice with value not exceeding Pl,000,000 a unit or be given Pl,000,000
constructed upon it a house at a cost of P4,000,000. Ownership of the house and cash benefit to acquire their own cars. It also grants supervisory employees car
lot was turned over to the director upon completion of the construction. 40% of benefits if they actually purchase their cars.
the value of the house and lot will be deducted from the director's salary over a
period of five years. Car benefits given to a manager, net of
withholding tax on compensation P 900,000
What is the monetary value of the fringe benefit? Value of cars purchased for two other managers 2,000,000
a. P 6,000,000 c. P 3,600,000 Cash payments to various car suppliers for
b. PZ,400,000 d. Pl,600,000 supervisory employees 1,600,000

Multiple Choice - Problems: Part 2 Compute the monetary value.

1. ln July 2021, Tipo-Tipo purchased a Pl,200,000 car for the u e of its manag ri l a. p 4,500,000 C. p 2,000,000

employee. Compute the monetary value to be report d re pectively for th b. P 3,600,000 d. P 1,600,000
calendar quarters ending September and December 2021.
a. p 1,200,000; p 120,000 C. p 120,000; p 120,000 7. Compute the fringe benefit tax if the employee is a resident citizen.
b. P 240,000; p 120,000 d. P 30,000; P 30,000 a. P 564,706; P 56,471 c. P 16,154; P 16,154
b. P 112,941; P 56,471 d. P 56,471 ; P 56,471
2· Mandaue reimbursed the following exp nse liquidation f it m n g ri 8 · Upi Carbon Plant acquired a Pl,000,000-motor vehicle for the u of it fi Id
employee:
engineer, a plant supervisor, assigned to a very remot fa ility from town.
Purchase of office supplies P 0,000
Personal meals and groceries 1 ,000

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 r 1- Fringe Benefit Tax Chapter 11 - Fringe Benefit Tax
chaPte 1
compute the monetary value of benefits subject to tax. Compute the quarterly monetary value.
a. p1,ooo,ooo c. P 100,000 a. p 122,200 C. p 121,200

b. p 200,000 d. P O · b. P 125,200 d. P 44,100

Dexter acquired a car for Pl,200,000 and transferred ownership to its supervisory 5. Tolosa Company paid or furnished the following in behalf of a supervisory
9 employee for the quarter ended March 2021:
· employee for P400,000. The car shall be used partly in the employer's business.
compute the monetary value. Membership dues in golf course P 10,000
a. p 80,000 c. P 800,000 One-year P200,000 interest free loan due December 2021
b. p 240,000 d. 1,200,000 Free vacation sponsored by Tolosa 12,000

Multiple Choice - Problems: Part 3 Compute the monetary value.

1. Tekla paid the P27,200 monthly rental of the residence of its managerial a. p 46,000 C. p 22,000

employee from January to May of 2021. Compute the fringe benefit tax for the first b. P 32,000 d. P 28,000
quarter and second quarter of 2 0 21.
a. p 6,400; p 6,400 C. p 19,200; p 12,800
6. During the last calendar quarter of 2021, Naval Highlands Company granted a
b. P 12,800; P 8,533 d. P 21,969; P 14,646 Filipino supervisory employee the following benefits:
Salaries P 120,000
2. Dog Company made the following payments in the first quarter of 2021: Performance bonus 20,000
13th month pay 40,000
Fringe benefits: Excess de minimis 12,000
- To the supermarket in payment for groceries of the company's manager and Cash price of car given to supervisory employee 300,000
family- P16,000
- To a university in payment for the tuition fee of the manager - P24,750 Compute the fringe benefit tax.
Salary of the manager, net of PS0,000 withholding tax - P350,000 a. P 168,000 C. p 146,824
b. P 151,529 d. P 141,176
Determine the fringe benefit tax due.
a. p 19,412 C. p 21,942
7. On August 1, 2021, San Fernando designated the use of its residential unit for its
b. P19,176 d.P184,118 managerial employee. The residential unit was acquired for P4,500,000 and has a
fair value of P4,000,000.
3. 0rmoc International acquired the following for the use of its executive officers:
Compute the fringe benefit tax for the third and fourth quarters of 2021.
P 23,000,000 a. p 100,000; p 100,000 C. p 13,235; p 13,325
Bell 206 helicopter
16,400,000 b. P 52,941; P 52,941 d. P 10,096; P 15,144
Elling E3 Executive (Seagoing motor yacht)
8. Benavidez Company granted the following fringe benefits in 2021:
Compute the monetary value.
January 15 - paid P68,000 for the birthday celebration expenses of its vice
a. P 39,400,000 c. P 820,000
president for operations
b. P 16,400,000 d. P 410,000
February 14 - distributed iPhones costing P47,600 each to four supervisory
4 Mindanao Manpower Corporation paid the following fringe benefits during the
·
employees as incentives
April 2 - granted the use of a residential unit to the vice president for finance
calendar quarter to its managerial employee:
with fair value of P3,000,000
P 10,000/month August 4 - transferred ownership of a residential dwelling with zonal value of
Salaries of household help
Sal · of personal security guard P 15,000 /month P4 000 000 and assessed value of P3,000,000 to the company president
p aries ' '
December 15 - distributed P896,000 in 13 th month pay to all employees (20 70
OL

ersonal driver P 15,000/month

P 4,000 of this relates to managerial or supervisory employees).
~nnual home owner's association dues
arbage dues P 100/week 408
407 I
I

J
 chapter 11 - Fringe Benefit Tax

compute the quarter.Iy fringe benefit tax to be remitted by Benavidez Company in

the first quarter and m the second quarter.
a. P 139,138; P 10,095 c. P54,400; P70,588
b. P 121,600; P 8,823 d. P32,000; P35,294

9_ What is the fringe benefit tax respectively in the third and fourth quarters?
a. Pl,891,176; P8,823 c. P2,163,942; Pl0,095
b. Pl,882,353; P84,329 d. Pl,882,353; PO

10. Busayong Corporation maintains a fleet of motor vehicles for business use and
employee use. The following relates to the calendar quarter just ended:
Cost of three motor vehicles u·sed exclusively for
I
sales, freights and delivery service P 4,500,000
Cost of a motor vehicle for employees' business
use and employee use 500,000
Rental payments for additional motor vehicle for 30,000
employees' personal use
Compute the total quarterly monetary value of the fringe benefit.
a. p 4,530,QQQ C. p 42,500
b. P 530,000 d. P 80,000

11. Digos Company owns a residential lot which was purchased for P800,000, eig~t
years ago. The lot was sold to a supervisory employee for only PS00,000 when it
was worth Pl,200,000.
Compute the fringe benefit expense.
a. P 300,000 c. P 700,000
b. P 400,000 d. P 0

12. Compute the fringe benefits tax.

a. P141,176 . c. P 329,412
b. P188,235 d. P 376,923

409