Chapter 4

Special Treatment of Fringe Benefits

What is fringe benefit?
 Does not form part of gross income tax
liability of an individual employee
 Fringe benefit tax is subject to a final
withholding tax
 The taxable fringe benefit (grossed-up
monetary value) and the fringe benefit tax
constitute allowable deductions from the
gross income of the employer

Terms  Fringe benefit any good. service or other benefit furnished or granted by an employer in cash or in kind in addition to basic salaries to individual employees  Rank and file employees those not holding managerial or supervisory positions  Managerial Employees those vested with powers to lay down and execute management policies .

Terms  Grossed-up Monetary Value refers to the whole amount of income realized by the employee = net amt of money or monetary value of property + fringe benefit tax thereon  De Minimis Benefits Facilities or privileges furnished or offered by an employer to his employees that are relatively of small value .

professional partnership or corporation .Tax Base Imposed on the grossed up monetary value of the fringe benefit furnished by the employer to managerial and supervisory employees. employer maybe an individual.

32% Engaged in Trade How to compute grossed-up How to compute grossed-up monetary value: monetary value: Monetary Value of Fringe Benefit Monetary Value of Fringe Benefit 75% 68% Thus: Thus: Acquisition Cost / 75% = Acquisition Cost / 68% = Grossed-up Monetary Value x 25% Grossed-up Monetary Value x 32% . Tax Base General: Non-Resident Alien Not Effective TY 2000 .

Tax Base  For Alien Engaged in Trade or Business How to compute grossed-up monetary value: Monetary Value of Fringe Benefit 85% Thus: Acquisition Cost / 85% = Grossed-up Monetary Value x 15% .

How to determine Monetary Value 1) If fringe benefit granted is money = amount granted or paid for 2) If fringe benefit is property and ownership is transferred to employee = value is the fair market value of the property 3) If fringe benefit is property and ownership is not transferred to employee = value is depreciation value of the property .

monetary value resides. then monetary is: value = 50% of rental MV or Zonal Value paid whichever is higher x 5% = Annual Value x 50% .Housing Privileges If the employer owns a If the employer leases a residential property residential property where the employee where the employee resides.Fringe Benefits and their Monetary Values .

monetary value = exclusive of interest x Acquisition cost or 5% = Annual Value x zonal value. then value = Acquisition cost.Housing Privileges If the employer purchases If the employer purchases a residential property a residential property where the employee and transfers ownership resides.Fringe Benefits and their Monetary Value . then monetary to the employee. whicever is 50% higher .

Fringe Benefits and their Monetary Values .Housing Privileges If the employer purchases a residential property and transfers ownership to the employee for residential use at a price less than the employer’s acquisition cost. whichever is higher Less: Cost to Empolyee . then monetary value is: FMV or Zonal Value.

when the expenses do not partake the nature of personal expenses attributable to the employee . except: .Expense Accounts  Expenses incurred by the employee but which are paid for or reimbursed by the employer.Fringe Benefits and their Monetary Values .when the expenses are duly receipted for in the name of the employer and. .

Motor Vehicles If the employer purchases If the employer gives the the motor vehicle in the employee cash to name of the employee – purchase and own a monetary value equals motor vehicle.Fringe Benefits and their Monetary Values . monetary acquisition cost value equals the cash received by the employee .

Fringe Benefits and their Monetary Values . exclusive of is = amount shouldered interest / 5 years by the employer . monetary value cost.Motor Vehicles If the employer purchases If the employer partially a car on installment shoulders the purchase basis with the employee price of a motor vehicle as owner. monetary with the employee as value is = acquisition owner.

monetary cost of vehicles not used for value = amount of rental business or non-personal payment for vehicles not used use / 5 years x 50% for business x 50% . of the business and monetary value = acquisition employees. Fringe Benefits and their Monetary Values .Motor Vehicles If the employer owns and If the employer leasess maintains a fleet of motor and maintains a fleet of vehicles for the use of the motor vehicles for the use business and employees.

Fringe Benefits and their Monetary Values . thus monetary subject to the fringe value = depreciation of benefit tax yatch at useful life of 20 years .Motor Vehicles  Use of helicopters and  Use of the yatch aircraft owned and whether owned or maintained by the maintained by the employer shall be employer shall be treated as “for business treated as taxable fringe use” and shall not be benefit.

if employer lends to or other similar employee at rate lower expenses. are taxable in rate is taxable fringe fringe benefits benefit . driver .refer to salary of than market value household help. the difference employer. borne by the than 12%.Other Fringe Benefits  Household Expenses  Interest on loans at less .

in full except: .Other Fringe Benefits  Expenses for foreign  Membership fees. dues travel .foreign travel to attend business and other expenses meetings or borne by employer .30% cost of first class ticket . conventions are not taxable fringe benefits taxable fringe benefits.lodging of $300 or less per day. and .

Other Fringe Benefits  Holiday and Vacation  Education assistance to Expenses of the the employee or his employee borne by the dependents .taxable employer – benefit unless the study treated as taxable is directly connected fringe benefits with the employer’s trade and he has to remain in the employ under a period agreed .

contributions for SSS and GSIS .cost of premiums borne by the employer for group insurance of employees .treated as taxable benefit except: .Other Fringe Benefits  Life or health insurance and other non-life insurance premiums .

Fringe Benefits Not Subject to fringe Benefits Tax  Fringe benefits authorized and exempted under the law  Contribution of the employer for the benefit of the employee to retirement. insurance and hospitalization benefits  Benefits given to rank and file employees  De minimis benefits  If grant of benefits is required by the nature or necessary to business  If the grant of the benefit is for the convenience of the employer .