FRINGE BENEFIT TAX

FRINGE BENEFITS
• Fringe benefit is any good, service or other benefit furnished or
granted by an employer in cash or in kind, in addition to basic
salaries, to an individual employee, except rank and file employee,
such as but not limited to:
1. Housing, except:
RR 3-98 provides that a housing unit situated inside or adjacent to the premises of a business
within maximum of 50 meters shall not be considered as a taxable fringe benefit.
Temporary housing for an employee who stays in the housing unit for 3 months or less shall not
be considered a taxable fringe benefit.

2. Expense account
3. Vehicle of any kind
4. Household personnel such as maid, driver and others
5. Interest on loans at less than market rate to the extent of
the difference between the market rate and the actual rate
granted

6. Membership fees, dues and other expenses borne by the

employer for the employee in social and athletic clubs or
other similar organizations

7. Holiday and vacation expenses

8. Expenses for foreign travel

9. Educational assistance to the employee or his

dependents

10. Life or health insurance and other non-life insurance

premiums or similar amounts in excess of GSIS and SSS.
 Tax treatment for fringe benefits
1. A rank and file employee – the value of such fringe
benefit shall be considered as part of the compensation
income of such employee subject to tax payable by the
employee.
2. A managerial or supervisory employee – the value shall
not be included in the compensation income of such
employee subject to tax. The fringe benefit tax (FBT) is
payable by the employer on behalf of the employee (NIRC,
Sec. 33).
 FRINGE BENEFITS TAX

• This tax was introduced in 1998.

• A final income tax of 35% is imposed on the grossed-up
monetary value of the fringe benefit furnished or granted
to the employee by the employer.
 Exclusions from Fringe Benefit Tax (FBT)
By way of exception, the following benefits are not subject to FBT which is a
final income tax:
• Those received by R&F employees
• The fringe benefit is necessary for business
• The fringe benefit is for the convenience or advantage of the employer.
• If the fringe benefit is exempted from income tax under the code.
• Employer contributions to employee retirement, insurance, and
hospitalization benefit plans.
• De minimis benefits which limited to facilities or privileges furnished or
offered by an employer to his employees that are relatively small value and
are given as a means of promoting health, goodwill, contentment, or
efficiency of his employees.
 example:
• The following data refer to expenses incurred by Y Car
Care, Inc. for its president, Jalala, during 2018.

a. Paid by Y Car Care with official receipts in the name of the company:
– Computer unit for Jalala's office, P40,000
– Furniture for Jalala's home, P72,000
– groceries for Jalala's family, P15,500
– construction materials for the repair or Jalala's garage at his residence, P60,000

b. Paid by X with official receipts in the name of the company:

– shopping receipts- clothes and shoes for Jalala's wife and daughter, P17,500
– Samples of competitors' car care products for office market study, P10,200
 Solution

PhP
Groceries P 5,500
Construction materials 60,000
Shopping receipts 7,500
Actual Monetary Value 73,000
divided by 65%
Grossed-up Monetary Value 112, 307.69
FB rate 35%
Fringe Benefit Tax P 39,307.69
• Mushroom Corporation allows its COO, Mr. Candido Perez, to
incur expenses subject to reimbursement. Mr. Perez presents the
following itemized receipts:

Light and Power (65% in the name of the company), P 8,000

Grocery items (Mr. Perez), P 15,000
Clothing (Mr. Perez), P5,000
Gasoline of company car, P 3,000
Transportation- business trip, P13,000

How much of the reimbursable expense would be subject to FBT?

Valencia, 2009
 Solution

PhP
Light and Power (P8,000*25%) P 2,000
Grocery 15,000
Clothing 5,000
Actual Monetary Value 22,000
divided by 65%
Grossed-up Monetary Value P 33,846.15
FB rate 35%
Fringe Benefit Tax P 11,846.15
• The Magnolia Corporation hired Miss Emerita Bulosan, a scientist
who discovered the trade secret of wonderball ice cream, and
gave her the following compensation and fringe benefits:

• Salary per month P 300,000

• Three personal security guards P 3,000 each/month
• Two maids P 2,000 each/month
• One secretaryin the office P 8,000 per month
• One personal driver P 4,000 per month
• Homeowner's association due P 600 per year

How much are the annual fringe benefits and FBT? Valencia, 2009
 Solution
PhP
3 personal securty guards (P3,000*3*12mos.) P 108,000
2 maids (P2,000*2*12mos.) 48,000
1 personal driver 48,000
Homeowner's assoc. due 600
Actual Monetary Value P 204,600
divided by 65%
Grossed-up Monetary Value 314,769.23
FB rate 35%
Fringe Benefit Tax P 110, 169.23