er 3 Fringe Benefit Tax Prior to the enactment of the comprehensive tax reform program Popularly known as the National Internal Revenue Code (NIRC), the only forms of employee income that were effectively taxed were those which were given in cash. This was because an income tax was automatically withheld and collected 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 Benefit 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, allowances, 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 nature 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 defined in Sec. 3(m) of RR 8-2019). In short, itis a form of pay which may be in the form of property, services, cash or cash equivalent to supplement a stated pay 149Fringe Beach Tig performance of services. Under the tax code, fringe benefits fe Senge beet tax aver ony Hse feage Benes VEN or fumished to 8 menagerial or supervisory employee. The regulations do tot cover those benefits which are part of taxable compensation income because such incomes are subject to withholding tax on compensation in ‘eecordance with RR No.2-98, as amended. The tax treatment of fringe benefits given to employees is shown in Table 3-1 below: "Tae conporaton Toone He eo SDaPeSWapEs POSTED He cae Tar Raumdl ora way ia se Far pees aparsoy nd manapralempbyees a atl, nebo suc ‘ope Sn. a wlth he rade ae alr conperstan COTE ‘The Labor Code distinguishes a rank-and-file employee from a ‘managerial employee. It provides that 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 employees, or to effectively recommend ‘such managerial actions. All employees not falling within 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 furnished or granted by ‘an empioyer, in cash or in kind, in addition to basic salaries, to an individual employee, other than a rank-and-file employee, The FBT is a final tax imposed on the employee withheld by the ‘employer, computed at 35% (beginning January 1, 2018 or upon the effectivity of TRAIN Law) on the grossed-up monetary value (GUMV) of the fringe benefit granted by the employer to an employee who holds @ ‘managerial or supervisory position. Being a final tax, the FBT is collectod ‘or withheld at source by the employer, meaning, at the firm's level rather 150 than at the taxpayer's valuation of benelis is allocating benefits among individuals Revenue (BIR) has also to contend vat 's avoided. The Bureau of Internal with fewer corporate tax returns, FBT is effective rag: to oe lone tee Baye FBT nat ater tan te lst day o the trade (TRAIN Laws Rt oie NaN Suna which withlaing was ILLUSTRATION f: Covered Employees ‘Ana was hited by Ea tobe te lat’s secretary and personal assistant. To ‘enable her to perform her duties wel. Eat provided a condo unit (adjacent to the offce) which Ana could use 2s her temporary residence. ste fir market value ofthe use ofthe cordo by Ana a inge benef thats subject o fringe benefit tax imposed under Secon 3 ofthe Nationa Intemal Revenue Code? ‘Answer: No. ‘ana s rhe a manage! nora supeisory employee. Ony hinge benas| ‘garted to mangoral or suporisoy employees ae suyct 10 the fge banefstax 181t Tie ge Beni ‘Tax Exempt Fringe Benefits ‘The following fringe benefits shall not be subject to basic tax oF fringe, benefit tax: 1) Fringe benefits which are authorized and exempted from income tax under any special law such a: = Contributions required under SSS law = Contributions required under GSIS law + Similar contributions under an existing law ‘© Premiums for group insurance of employees 2) I the grant of fringe benefits to the employee is required by the nature of, oF necessary to the trade, business or profession of the yanted to tne manager ang soperasory employees of Phipine Gaming Management | Corporation (PGMC) who wil be away from the office site for atleast & hours to | vat to techie holders for epi andor inspacton of equipment eased by | PGC tom Phiippine Carty Sweepsiakes Office (PCO). Should he ore aiowarce be sibjee lax? Answer: No The allowance Is requred ty the natu of or necessary fo tho vad or ‘sims PGUC, hance, ot subjct oho fing bane tox proscribed in Secion 238) ol he Tax Code. Consequently, isnot subject o Income Tax ‘nd 0 mtbeting tax By ho ap token, the afrestted allowance utc inny te cured oF expuced 10 be Incured by the managoril and spore eons in the perma otha aes. cane andre 8 pat of conpansaton subject to witoldng lax even H the ‘enployees fall 0 sccountiguidate the samo consiring that said ‘xpenaes ae pr-compted on 8 daly bass andar pao erployos who 2.00 ssgrmet or dy (BR Ring Ho, 013-2002 dod Ap 5, 2002). 3) Do minimis benefits (refer to pay 187) 4) IC the grant of benefits is for the convenience or adve v0 convenience or advantage of the 182 tii ILLUSTRATION: CASE A Use the same data in SASEA ata in Husraton #1 {5 the far market valu of the use ofthe condo ‘ ‘un by Ana a “compensation Conrady oes as leur Scion 24 lhe Tax Cate an egienl © cedtate wicking taxon compensation cme? ‘Ro condo tis proved fe contenines ote epost, bac does conse 0 taxable tinge tena. Bag his 4 recuse hab mcs Eaten Question 2: ‘Assuming Ana is a managetal or supervisory employe, isthe fair markat value of the use of the condo by Ara a “hinge benef subject to FBT? Answer: No ‘As explained in question #1 grant of berets sor the convenionce or ‘acvaroge of he employer, mespactve oth employee's rank, to batt ‘hal ncl be subject oligo bart lar and ba ax on compensation CASE B: ‘Arthur Henderson and Mare Henderson fed their annual income tax wit the BIR. Athur is president of American Intemational Underwriters for the Philipines, Inc, whichis a domestic cxporaton engaged in te business of (general norife insurance, and represents a group of American insurance ‘Companies engaged in the business of general non-ife insurance ‘The BIR demanded payment for alleged deficiency taxes. In ther computation, the BIR included as part of taxable income: = Adhu’s allowancas for rental, resdental expenses, subsistence, water, ‘electri and telephone expenses = Entrance fe tothe Marka Gun and Country Chub wich was paid by his ‘employer fr his aocount, nd + Traveling allowance of his wile ‘The taxpayers jusiicaton ae as follows: = As to allowances for rental and utes, Athur. did not receive mney for the alowances. Instead, the apartment is furished and paid for by his ‘employer-crporaion (he mother company of American Inlrrationl), for the employer coporatons purposes. The spouses had no choice but to live in the expensive aparent sinco the company used io entertain ‘quests, to accomnodale ofl, end to entertain customers. 159— Fringe Beeoft Toe Sea else alia Thea oslo conser zoe see a renee |+ Deccres slmenoesno ernis mer dtl Ne iis | otinereasing and sustaining the business of his employer. «ety ssonpaed inh You on 9 buses tp ass ee rene crplqercopeios mas te wok Sea nal ¢ widng ha he enpoe hed fo | Src Stent be cine ite ete [nie The Supreme Court ued tht the clans are nl part of taxable income esrmeavirataar seme ted creer or SS ccnaeeearen nae Rewimnee tnd seu ewes ob crsved ro sj ome tx ieee oman See toren Sensteeeeenneee oats pease Re py pa pe IE ss Computation of Fringe Benefit Tax In general, fringe beneft tax rate is 35% (beginning January 1, 2018 or upon the effectivity of TRAIN Law). However, FET rate for nonresident alien not-engaged in trade or business is 25%. The ‘computation ofthe fringe benefits tax is done by: 1) Evaluating the value of the benefit granted or determining the monetary value. 2), Determining the proportion or percentage (gross monetary factor) of the benefit which is subject to the FBT. 3) Determining the grossed-up monetary value of the fringe benefit by dividing the monetary value of the fringe benefit by the gross monetary value factor; and 4) Multiplying the grossed-up monetary value factor by the FBT rate, 154 Frage Beach Tig FBT Rates = The rates of fringe benefit tax vary depending on how the employees aro taxed. The reason i tha he FBT lords to recovor the Income tax of the employee so the rate follows the income taxation of ‘such employees as shown in table 3-2 below: UNSER eae TOOTS lssifcation of Taxpayers, Monetary valve Bo Pax Divide by gross monetary value factor 6" 75% Grossed-up monelary vaue x FBT Rete Fringe Benefit Tax NOTE: 1 Prarto Ja. 1, 2018, FBT at was 52% ILLUSTRATION 4: Determine the grossed-yp monetary valve and the fringe benef tax of the following (it appicabl) fr 2018 taxable year: 39,000 grocery allowance forthe personal consumption of an ‘executive of ABC Corporation. 'P40,800 expenses paid by an execitive of ABC Corporation duly receipt for inthe name of ABC Corporation and isnot inthe nature of Personal expense 3. P4O,B00 expenses incured by an executive of ABC Corporation in Connection with attending business meeting or convention 40.800 grocery allowance forthe personal consumption of one of ‘ABC Copoaon' rank and le enpoyees. coca, hone, #8 ola ge bref laxabe fo ihe employee 27 ‘dna tunes expen of ABC Coperation ‘GUMV = P40,800; FBT = PO; same explanation with #2 ‘GUMY = P40,800 same win monetary vale fo basic tax, 185T in Ae oe Fringe Bashi Te vonats wos opt ho an te lenge wer “zaaies end’ wages. Compensation tax roaimont of noe epecrre ax return of rial txpAVES ae a incomes ser mseaning. the income tax payable on it are included in the goss am ge benats are therfore grossed 80 thatthe income So ganed as part of te total benef. The gressed-UP monetary tas a0 ctnnge benef presents the entre income eamed by the Fae rie Beuges the net amount of money recelved of the net cee nc of ay property received (xnown as monetary vale’ and the se EBT recelvedby te employee from the employer. Valuation of fringe benefits + if granted in money, the value is the amount granted. it granted in property and ownership is transferred to the employee, the value isthe fair market value of the property. + granted in property but ownership is not transferred to the employe ‘the value is equal to the depreciation value ofthe property Deductible expense of the employer If the fringe beneft is given to a rank and file employee, or to @ supervisory ot managerial employee, but is not subject to fringe benefit tax, ‘the deduction for the employer is the monetary value ofthe fringe benefit. On the other hand, if the fringe beneft 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 benofi ‘expense and the fringe beneft tax. ILLUSTRATION 5: Assume an employer fumished cash fringe benefit subject to finge benef tax amounting o 975,000 ats sereptjounlenyn be bios te employe? Answer: ot ig baa pee (rey) Fie bret ex egese (PS75,000065%) x 35% eed ap mney vas conposed a 875 000 pall {oe enplyee and 525,000 patented oth Bi is 156 ton 2: ‘Assume that the cash fi ‘should be the appropiate joumal entry ofthe employer? ge benefit isnot subject to fringe benefit tax, what Answer: Fringe beneft expense "975,000 Convent expense) i 975,000, DE MINIMIS BENEFITS Facilties and Privileges such as entertainment, medical services, fr so called "courtesy" discounts on purchases, otherwise:kniown as. -De Minimis Benefits,” furrished or offered by an employer to his employees. fare not considered, as compensation subject to income tax and consequently to withholding tax, if such faciities or privileges are of relatively small value and are offered or furnished by the employer merely ‘as means of promoting the health, goodwil, conteniment 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 6-2012 and RR 41-2015). These benefits are exempt from withholding tax on compensation and fringe benefits tax (FBT), regardlesssofothe-postion of the employee who received such benefits) The following shall be considered de minimis benefits not subject to income. tax.as well 2s withholding tax on compensation income of both ‘managerial and rank and fie employees: 1. Monetized unused vacation leave credits of private employees not ‘exceeding “10 days” during the year. Payment of monetized unused “vacation” leave “eredlls exceeding 10 days as well as payment of “sick” leave, regardless of number of days shall be added to “other benefits” with @ 90,000 ceiling. Any amount exceeding the FS0,000 cellingldistlssed-in-page 186 shall_be-subject-to-basie“and: ‘creditable withholding tax on compensation income (R.R. No. 8 2018) 187= Frege Bevoft Toe 2 Monetized value of vacation and sick leave credits paid fo ‘ovement officials and employees. eee pri Saar Papert of monetized urusce Seaton and sch" Teave ces fo goverment oficasienployees regardless of the suber of days shal be exe from fax on compensation come, 3 Medical cash alowanes 10 Uependenis of employees notexceeding 1,500 per semester oF P2508 month. 4, Rice-subsiéysotinotimore.than,P2,000,per month, or 1 sack (50k9.) rice per month. 5. Uniforms given to employees by the employer not exceeding P6,000 per annum (as amended by RR 8-2018). 6. Actual medical assistance given not exceeding P10,000 per annum such as medical allowance to cover medical and healthcare needs, ‘annual medicallexecutive check-up, matemity assistance and routine consultations. 7. Laundry allowance not exceeding P300 per month. 8. Employee achievement awards (e.g. for length of service or safety “2chievement.which must bosin.thesforr-of-a tangible personal propery ‘other than cash or git certificate with and annual monetary value not exceeding P10,000 under an established written plan which does not discriminatelin favor ofhighiy-paid employees). 9. [Gifts given during Christmas end mejor anniversary-celebrations:not ‘exceeding P5,000 per employee per annum (RR &-2012). 10. Daily meal allowance forovertime WOrk and hight/graveyard shift not exceeding 25% of the basic mfamum wage on. = per region, basis provided ch Benefits ven on account Of overume work or gen 1 sproseeson sawyer. shah Lk. ene work or ne a be kel nse USEC, Honor ned! Sores se edd faced onl to empoyees ae er mt f laced fr “zhane connor oe enya! elvan a Ns parc, should be fumished within the premises of the employer. e 158 CaageBeasft Tis 41, Benefits received by an employee by virtue of a eo collective bargain agreement (CBA) and Productly ingot sehomes provided tal tie tolal annual monetary value received trom the two (2) lems. above sombine, 0 serene F10,000.00 par amloyeo per taxable Year ING No, not more than P10,000~ considered a de minimis ‘+ more tran P1000 the entre amount shal beincuded the “oer bones" wat 30,000 cang NOTE: ‘+ This ruing shall apply ony to_ benefits under: OBArandypraductiyincante, schemes. CBA may also be relered as CNA (colctive negobaton agreement ‘The foregoing list of de minimis benefits are all inclusive... Meaning, all other benefits given by employers which are not included in the lenuimerations above shall not be considered de minimis benefits (RR 8-2012; RR 1-2018). Excess of de minimis benefits over their respective ceilings “The amount of de minimis benefits conforming to the celling of de minimis benefits shall not be considered in determining the 90.000 Celling of "other benefits” excluded from the gross income under Section 32B(7)(e) of the Code as amended by RA10963-TRAIN Law. On the ‘ther hand, the excess of the de minimis benefits over their respective Ceilings prescribed under this regulation shall be considered as part of ‘Other benefits subject to tax only on the excess over the 20,000 ceiling. ‘Allother benefits given by employers which are not included in the ‘enumeration of de minimis benefits shall not be considered de minimis Bonatte but should fall under the clasifiation of “ler benefits” and is therefore subject tothe P90,00 cling, The exces of the bene eve the 90,000 limit would form part of an individual's gross income, an foun em go oe re laces (tefer to Table 3-3 forthe applicable tax on fringe benefits and de minimis benefits). 158“ND 10. Fringe Benefit Ue Monetized value of vacation and sick leave credits paid to ‘government officials and employees. Pee MEN etree rene vo ren ep nt cee eters omnia Medical cash allowance to dependents of employees not exceeding P1500 per semester or F250 a month. Rice subsidy of not more than P2,000 per month or 1 sack (50kg.) rice ‘per month Uniforms given to employees by the employer not exceeding P6,000 per annum (as amended by RR &-2018). Actual medical assistance given not exceeding 10,000 per annum ‘such as medical allowance to cover medical and healthcare needs, annual medicallexecutive check-up, matemity assistance and routine consultations. Launcry allowance not exceeding P300 per month. Employee achievement awards (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 and annual monetary value not ‘exceeding 210,000 under an established written plan which does not discriminate in favor of highly paid employees). Gits given during Christmas and major anniversary celebrations not ‘exceeding P5,000 per employee per annum (RR &-2012).. Daily meal allowance for overtime work and nightgraveyard shift not exceeding 25% of the basic minimum wage on a per region basis provided such benefit is given on account of overtime work or if given to ‘employees on nightigraveyard shift. 2 The grant of meal alowance, if not for overtime werk or nighlgravayard shit, should be sutyect to come tar (RR 05-2011). However, meal ellowance snd lodging (uri bythe employer fo the employees are exempt fom tax Wf fuished forthe ‘advantage or convenience of the employer’. Mea allowance, inthis particular case ‘hou be furished wan the premises of the employer. 158 Fringe Beacfit Ta 11. Benefits received by an empl of aor loye0 by vue of @ callctv bargaining aroerent (BA) and Prodciyicentva sehr roves ale bined, ha daaNed from the two (2) hems above (AR 1-2048). ,000.00 per employee per taxablo year not mere than 0,000 considered as de minis mare than P1000 the etn : Pepe aout sallbe nuded in tho “ter banaits' wth NoTE: ‘This ing shall apply only i benefis under CBA and producvy incentve schemes. OBA may ao be refed o 3s CNA(clecve nagoaton agreement The foregoing ist of de minimis benefits ae all inclusive. Meaning, ail other benefits gven by employers which are not Included in the fenumerations above shal not be considered de minimis benefits (RR 8-2012; RR 1-2015). Excess of de minimis benefits over their respective cellings ‘The amount of de minimis benefits conforming to the celiing of de ‘minimis benefits shall not be considered in determining the P90,000 ceiling of “other benefits” excluded from the gross income under Section 32B(7)(e) of the Code as amended by RATO963-TRAIN Law. On the fother hand, the excess of the de minimis benefits over their respective Ceilings prescribed under this regulation shall be considered as part of Other benefits subject to tax only on the excess over the 90,000 ceiling. Allother 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 classification of “other benefits” and is thorefore subject to the P90,000 celing. The excess of the benefts over the 90,000 limit would form part of an individuals gross income. and would be subject to income tax and applicable creditable withholding taxes (ffer to Table 3 for the applicable tax on fringe benefis and de minimis benef). 159~ Tring Boosh Tie Lange Boaaft Tie Fixed or Variable allowances Se 'n general, fixed or variable allowances which are received by public officer or employee or offcar of employee of a private entity in addition to the regular compensation, fixed for his position or office, is compensation subject to income tax and consequent, creditable withnolding tax on compensation income [Section 278.1 (A) of RR 2-98 ‘as amended by RR 10-2008]. Examples of fixed or variable allowances ‘are transportation allowance, representation allowance, communication allowance, lving away from home allowance (LAFHA), and the Ike. Reasonable amounts of reimbursements/advances for aveling and entertainment expenses which are pre-computed on a daily basis and are Y 1¢ while he is on an assignment or duty need not be (RATA) grantedFringe t Tae Ae 162 TU ie ett oe eres Subject to Conforming Fringe step Benet Tax Se i De Minis enast nvexcen” .f 90,000 Tit hen cedded wih ‘ther benefited 163Fringe Benofit Ti | __ the sete eioyse forthe | Manaany Valu: The higher beween FAV ng Ee ee coro OT eer ieaaaa Lerner al in | Monetary Value: Acquisition cos, exclusive of | ic a anna = Erste puchases rostral pope 8 | Monin Val Tia e the aston 8 or oral va 2 eterna ters omer 0 evploee tea i Eas ras tl ery 2 | Moneta Va: The ier bate he FTA <7. eri popary an | Monetary Va: The igher between fe FUT gy Se Se | etveamncinn nacre zrost CiRess cost tothe employee fan Bael= PA eZ vee Higher 5% Monetary vale he benef = For Zonal whichever s higher «8% x 50% heal Beelt= Angin ost excuheonret 5% onetr vale cle bent = Again cost exci oneres x 5% 50% ‘Monetary Value: Acquison cost of veils net ‘nomaly used for business divided by 5 years, mot vehicles forthe use ofthe business and enoloyees. 7) Emploe asesTrarians a fea moter | Moneary Vabe: Amount of etal payments rot vebsdes forthe use ofthe business an the | normaly used for business purposes x 50% cenpbyees 3) Enplyer purchases veide nthe rare of | Monetary Vali: Rowson cost |__enpioyee “Employer proves employee wih cash or | Monetary Vale: Cash recaved the puhase of the veil, and ownership is laced nthe name ofthe employee. | ‘Employes purcases the vehicle on ‘anetay Value Asgsion cost excuse of Fe instalment and onersips placed inthe | dhidedby 5 years name ole employee 1) Employer shoulders a parton le aroun ‘tthe purchase pce cf vehicle and comers placed inthe name of he empoyee. ‘enetary Vaiss Anount shouldered by erp" 164 [ILLUSTRATIONS — Fringe Beagfit Tee (SPECIAL RULES IN COMPUTING MONETARY VALUE) The following usratons are based on the lusatons under Revenue Regulations 3-98 (as amended under RAtO963-TRAIN Law), GASEA Im 2021, a domestic corporation pad forthe monty rental of a residential house of its branch manager, Mr. Juan Dela Cruz, amounting 1o P198,000. (Assume there is no transfer of omnership) Question 1: Whats the monetary vale ofthe benefit? Question 2: Whats the grossed-up monetary value ofthe benef? Question 3: How muchis tho fnge benef tax? Question 4: Total amount deduetble by the employer trom is gross income? Question &: What is the apropriate journal entry to record the provision of the above benef? a Answers: ‘Question 1: 278,000 ‘Question 2: 120.000, ‘Question 3: 242,000, Question 4: 198,000 Solution: Rental payment Monetary value vie by cuMy Xx Fringe benafttax rate Monthly Fringe benefit tax expense ‘At: Rentals paid “otal Deductible Expense (Question 5 To record the transaction, the following joumal entries Fringe benef expense Fringe benef ax expense ‘Cash (Rental payment) FB. TaxPayable 165'A domestic corporation owns a condominium uit In 2021, the said corporation furnished and granted the sod propery forthe residential use of is Assistant Vice President. The fair market value of the property per BIR assessment amounts to P10,000,000, whi ts fair market value 2s shown in its current Real fi NOTE: = Atough the monetary vale of the benettis 50% only ofthe rental payment, the foal dedocibie amount ofthe employer i tho foal ofthe ‘ala! rental payment and the sppicable fringe benef tax. The entre | ‘amount (P19, 001) i considered as ota conpensaton expense incured bythe employer. Taro, the special resin computing the monetary ‘ale of he Denoft soul be taken nto consizeraton any for purposes ‘of computing the fringe benefit tx. Frage Beach Tae Fringe benef tax P1126 | Fringe benefitaxogense —pingte] |__Fiingebenefttaxpayable 1.218 | Property Declaration amounts to ®8,000,000. Determine the following: 1: Monthly Monetary value ofthe benef? 2 Monthly Grossed-up monetary value ofthe benef? ‘3 Monthy Fringe benefit expense? ‘3 Monthy Fringe benefit tx expense? 4 Tolal amount deductible by the employer forthe month? 5; Journal entry o record the provision ofthe above benefit? Answers: 1:20.33 2:R02,051 3:P 4 Ri1218 ERN218 Solution: FMV per BIR assessment (Higher) 10,000,000 SM, x Value of he benefit 500,000 x 50%, ‘Annual Monetary value 250,000 Divide by $2 months ‘Monthly monetary valve owe Grossed-up monetary value X Fringe benefit ax rale Fringe benefit tax Deductible by the employer 166 | casec: sig the same data n Case 8 and assuming tha the scqistion cost ofthe propery is 5,000 wt a remaing ut eo tn (10) yar. How much is the monthly fringe benefit expense? ‘Answers: P41,667 computed as follows: i masa - See. cre rn ‘Feinge| expense (for the year) 500,000 me en wr Fae ei Ite zeal va ef matt vale of he sll prope is greater han 1s cost subloctfo deprciaion, the excess amount shal be used in campuing ads! dopreceton expense alowed 8s 9 deduction fom the employers oss incame as ings benefit eanse and shal be ‘amortzed treughast the remain uh fe (RR -98) The furl ‘ont fo the moh in this case 2s provided nth foregoing revenue mln sib: Fringe bene eperee nia Fringe beef tx expense z "ame cee) rele ager Fringe benef ax payebo 41218riage Benoit Tea NON-TAXABLE HOUSING BENEFITS The following housing benefits shall not benefits (Section 33 ~ tax code}: be considered taxable fringe Housing unit inside or adjacent (wthin 50 meters) from the perimeter of the business premises, rousing unt which is stated “inside or aacent” othe pramiaos ot cnet ot be consiored asa taxable tinge benef A housing 2 aera’ agjpcent to te premises of te busines i it SS ce asamum a ity (60) meters rom the perimeter ofthe ra gi be corsigerd to be forthe “convenience or advaniage of nosing unt ncaa wn ty (80 meters om the paimetr of te oe imases and be employees ae required fo be oral due othe uses Ze Taper operation (IR Rulng No, DAS36-04, December 16, Hr eS to Rag Notdayeriipies, cand BIR Rung No. DA-24- a nay 72004 sced to Sond Koghel Phils) ne) 2) Temporary housing fora stay in the housing unt for three (3) months or 3 y less. Housing privilege of military officials of the Armed Forces of the Philippines. Other Fringe Benefits Under this category, the value ofthe benefit representing the amount . [plerest income from Philippine currency deposit with Security 178 Cheper ris - Frage Bensfi Tee &- P50.000 winnings from PCSO and Philippine lotto” 5 ease Sie ego lt Wich of the fl rence ane? (lowing Is a tnge benefit not covered by the fringe 2. De minimis benef Housing priveges granted ora and tank nd fle emo © Fringe benafis graed 26 a reaul of ie eons of tho business, trade, or profess im gals, F2de, or profession of the employer. ‘The following earnings are subject to finge benofit tax, excopt ‘a. Salary of a rank-and-file employee b. Housing necessary for trade and for the convenience of the employer ©. Food allowance for the convenience of the employer and necessary in the conduct of the business. d. Allofthe above ‘The following are exempt fringe benefits, except for one ‘a. Fringe benefits given to rank and file employee. . Fringe benefit given for the convenience of the employee. fc. When the fringe benefit is required by the nature of or Necessary to the trade, business or profession of the employer. J. Rice benefit amounting to P1,500 a month, ‘Which of the following benefits is not subject to the fringe benefits tax? ‘8. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans b. Housing ©. Expense account 4d. Vehicle of any kind Statement 1: Household of the employee borne by the employer such 28 salaries of household help, personal diver and other similar personal expenses are taxable finge benefits. ‘Statement 2: A fringe benefit which isnot subject tothe fringe benofit {ax is returnable income of the employee. Statements 1 and 2 are false ‘Statement 1 is true but statement 2s false ‘Statement 1 is false but statement 2 is true Statements 1 and 2 are tue 179Caarter Eqervives ~ bringe Berofil Te 7 . 410 Fringe benefit tax is computed based on the ‘Monetary value of the fringe benefit Book value of the fringe benofit Grossed-up monetary value of the fringe benefit Fair value of the fringe benefit 11. Which of the folowing statements regarding grossod-up monetary ‘ae creszsedup mortar valve ofthe finge bene is simply 2 figure meant to represent the entire income eared by the 1, he grossedyp monetary valve incudes the net amount of money received, the net monetary value of any property received, and the amount of fringe benefit tax. IN The grossed-up monetary value of the fringe benefit is etermined by dividing the monetary value of the fringe benefit bby 65% stating January 1, 2018. a tony © band only ¢ \.tand th None of the above 12, Which statement is wrong? The amount on which the fringe benefit tax rate is appliod is: ‘a. The monetary value of the fringe benefit . The grossed-up monetary value of fringe benefit . The amount deductible by the employer from hisits gross income d. Reffected in the books of accounts in the two accounts of “fringe benefit expense” and “fringe benefit tax expense’ 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 in the books of accounts is a Fringe benefit expense 10% Fringe benefit tax expense 10% ‘Cash 0% b. Fringe benefit tax expense wx Cash v0 Fringe benefit expense rx Fringe benefit tax expenee 10x Income constructively 00 received Cash 4. Any of the above 180 14 45. 16. 17 |. The monetary value of frn Chapler Eversies Unage Benafit Tie 190 benef it givan in ‘a. Fair markot val money Is B Amount Coal (IR) or zonal valunwhichovor is highor cc. Depreciated value 4. Acquisition cost plus other incidental costs st gy at so ney ae el x IS not allowed as a rom the employe ier wT Sates Se : Seocot schema Stetement 1: The exempten of any tinge benefit rom the fringe beret ox shall ret be ntoeted fo ea exempon em ay oar income tak imposed under he Tax Code ect he Stra IKewise expressly exempt fom ary ater income tax mposed uncer the Tax Corde or under ay other exist aw Statement 2: If the fringe benefit is exempted from the fringe benefit tax, the same may, however stil fom part of the employee's gross ‘compensation income which is subject to income tax, hence, likewise subject to withholding tax on compensation income payment ‘2. Statements 1 and 2 are false 'b. Statement 1is true but statement 2is false Statement 1 is false but statement 2is tue 4. Statements 1 and 2 are tue Cost of life or health insurance and other norife insurance premiums bore by the employer for his employee shall be treated as taxable fringe benefit, except "2. Contributions of the employer for the benefit of the employee pursuant to provision of exising SSS and GSIS laws. 'b. Cost of premiums borne by the employer for the group insurance of his employees. c. Both “a” and“b” ._ None of the above 181“yy Chapter Eseries ~ Fring Beasft Ta 18. Which of the following statements regarding fringe benefits true? |. Expenses incurred by the employee but which are 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 the 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. |. The exemption of any fringe benefit from the fringe benefit tax shall NOT be interpreted to mean exemption from any other income tax unless the same is likewise exempt by law. a. tony , Iand Il only b. Land Ill only 4. Allofthe above 19. Fringe benefits NOT SUBJECT to fringe benefit tax include which of the following? |. Fringe benefits authorized and exempted from income tax under the Code or under any special law. |. Contributions of the employer for the benefit of the empioyee to retirement, insurance, and hospitalization benefit plans. IIL Benefits given to the rank and file, whether granted under a collective bargaining agreement or not, 1V.__De minimis benefits, ‘a. Vand Il only ©. Allof the above b. Mand i only 4. None of the above 20. Which ofthe following shall be subject to fringe benefits tax? . Housing privilege of Armed Forces of the Philippines. bb. Housing units situated inside or adjacent to business or factory {located within 30 meters from the perimeter of the business. ©. Temporary housing for an employee who stays in the housing unit for 3 months or less. 4. Housing privilege of an alien employee of an offshore banking unit in the Philippines. Computation of FBT ee much is the allowable deduction from business income of a mestic corporation which granted and paid R97,500 frin nefits: 10 its key officers in 20217 oe ®. Pr50,000 c. P99,000 b. P100,000 d. 65,000 182 ‘employees To managerial emplo Torrank and fe empoyoss ari aciable deduction rom the gross Income of the corporat forthe fringe benots den Dompreee helen ‘@. P2,000,000 ©. P6,320,000 ». 2,148,000 4. P7,000,000 1,300,000 5,000,000 ex oom Te oe b. P376,470 . P129231 24, Using the above data, the total deductible expense is a. P1,294,118 ©. P1,284,000 b. P284,118 v4. P1'329,231 Use the following data forthe next two questions: From a managerial employee for taxable year 2021: Salaries and wages- net of the following 681.200 ~ SSS and medicare contributions 12,000 = tax withheld 134,800 Total fixed monthly allowance (PS,000/mo.) 60,000 Allowance, not subject to liquidation 48,000 Gasoline allowance, subject to liquidation 30,000 413 month pay Ci Christmas bonus 5.000, 25. Th sation income subject to graduated rate is oer Petci00 «. P816,000 b. P681,200 SISO 26, The fringe benefit tax due from te above benefits 2. P36,706, ea b, P3312 ae 183Chap Exerses ~ Frege Bene he Toe 10 Determination of the Monetary Value for ‘Special Rules on th nefits Housing and Vehicle ue of a housing 27. For purposes of the fringe benefit tax, the monetary val ener granted by employer to employee where the housing uni prowded for use by the employee as his usual place of residence is ‘ved by the employer. ‘a. The amount of deprecation forthe housing unit B 50% of the annual value which is 5% of the fair market value ‘or zonal value, whichever i higher. 50% of the amount of depreciation. 6. Net book value ; 28. in 2024, Mabuhay Corporation paid for the annual rental of a fesidential house used by its general_ manager amounting to 637,500. The deductible amount of Mabuhay Corporation is ‘2. P637,500 . P468,750 b. P318,750 . P809,135 Use the following 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 Makati City, Philippines. ‘Data on the condominium unit for 2020 taxable year follows: Fair market value in the Real Property Declaration 1,000,000 Zonal value 2,000,000 Fair market value 2,500,000 28. How much is the monetary value of the fringe benefit and the fringe benefit tax, respectively? ‘a. P4167; P2,244 bb. P50,000; P26,923 . 2,000,000; P705,832 4. P6,127.45; P945,177 30, Assume the residential condominium unit was purchased by the ‘company in installment for the executive's free use. Acquisition cost exclusive of interest was P3,000,000. At what amount should the company report as the monthly monetary value of the fringe benefit ‘and the fringe benefit tax, respectively? ‘a, 4,166.67; P1,961 c. P2,000,000; P705,832 ». P1,500,000; P326,400 d. 6,250; P3,365 184 31. Assume the residents! cond Company report as the mong fringe benefil tax, respectively? ‘a. 416,667; P196.078 5: P5,.000.000%2.692.08 ¢. prseee tae O52 9. P75,000; 35,204 42, Assume e reset condi (Sey ca oan rpc yf cxecine eson cs uate fees wes Paces a as ‘oral vale datried a PSO he eeboncen ae pay P2,000,000 to the employer before the transfer of ownership is Ima. Al what sn sane Cogeny ep ee Se nee {ae ota roge tenet ade ge beh rarer 2 28000000; stones e Bahoim Binneaas &: ersooane misedoo” @ peletbusate 33, Assume the residential condominium unit is located in Cebu and that the executive is allowed to use the same for a period of three months hile he is completing an evaluation of the overall performance of the ‘company's Cebu branch, At what amount should tne company report 2 the manatay value ofthe Hinge bereft andthe Hinge Bart te, respectively? a. Pa.1667.67: P1,961 . P1,500,000; 326,400 «. P2,000,000; 705,832 6. PO; PO. Use the following data for the next five questions: Included in the compensation package of the Chiel Accountant is car plan worth P1,000,000. The ownership will be transferred in the name of the employe 34, Assume the employer purchases the car in the name of the employee. ‘At vwtat amount should the employer report as the grossed-up monetary value of the fringe benefit and the fringe benefit tax, respectively? 1, P1,538,462; P538,462 bb, P1,000,000; P320,000 jdes P800,000 to the employee to purchase any vehicle of his intrest, Ownership ofthe cari placed in he name Fierce hee. The erpayes purchased a brand rew car worth of the employee, Te mount should the empayer report 2s the 6. P795,294; 295,294 «. P500,000; 160,000 5. Assume the employer prov 185Cher Gerias - Figo Bash Tae crosedup noel vue fhe age bereft andthe ngs beret fr rea c. P1,230,769; P430,769 a. P1,764,708; P564,706 b. 1,470,588; P470,588 d. PBOO,000; P256,000 36. Assume the empl purchases the car in installment in ‘the name of the employee. "At whet amount should the employer report 28 the (yossed-up monetary value ofthe finge benefit and the fringe beneft fax respectively? 2 P1.470.588; Pa7O.566° _c. P190,000; 45.500 b. P1,000,0¢ 320,000. P200,000; 64,000 DE MINIMIS BENEFITS 37. Statement 1: De minimis benefits are Facilities or privileges furished or offered by an employer to his employees that 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 ‘employees. ‘Statement 2: De Minimis benefit given to rank and file employees or to managerial or supervisory employees are not subject to final withholding tx for fringe benefit and creditable withholding tax. a. Statements 1 and 2 are false . Statement 1 is true but statement 2is false . Statement 1 is false but statement 2is true 4d. Statements 1 and 2 are true 38. Alpha Company grants grocery allowance of P5,000 per semester per employee payable every June 30 and December 31 based on the existing Comprehensive Agreement with its employees. The benefit ‘tanted is: ‘2. Exempt from basic income tax but subject to 10% creditable withholding tax. ', Exempt from basic income tax and to creditable withholding tax cf Subject to fringe beneft tax if the reci oad fring ‘recipient is a rank and file 4. Subject to fringe benefit tax if the recipi mani eee ipient is a managerial 38, Fixed daly meal allonances granted employees a e Exempt from income tax x us Subject tinge Benet tx fh meen ie recipient is a rank and file 186 Chir Exe - Fringe Baki Tie Subject to nge benef employes Pee tx ifthe recipient fs a managerial 4. Subject to basic incom uP!ec1o basi income tx regardless of employee's rank Peep tae Sctsod pss a a et low tng Statement 2. ~ Actual tet smpt de minimis benef fal Set son exonpide ma Stats rot exceeding P10,000 Per 2 Statements and an ae B. Siatoment tis tue tut satenent 2 Statements tase bu sore oe d, Statements 1 and 2 are true 44, Other benefts received by employees trom an employer: in the st do minis tenftuner RREDDIN e ererten a @, Treated as de minimis if tho benefits ate of relatively small value and are offered or fumished by the employer merely as means of promoting the health, goodwil, contentment, oF efficiency of his employees, . Treated as de minimis, regardless ofthe value, if such benefits {are offered or furished by the emplayer merely as a moans of promoting the health, goodwil, contentment, or effcioncy of his employees. ©. Not de minimis benefis because the list as provided in the regulations are all inclusive 6. None of the above 42, Basoonabla butinoc xprmnn te pt 0 separ BSR ete he eopuiee cent ceieer ameeocn Conant ae no arable ae ge Seete. Which s NOT wus? Tie sar deed covet (eee regen ne at transportation) except lodging cost in a hotel or similar Feet cctara stares ot Osean isso see aan ntte tj ating oo (oe eee saree cuisine 13a shod oe ec beatin Haver ah ote ae eye toe shal be aes iva ge sence oe Ill. The expenses should be supported by documents proving the Tha sop ho ne 2 areata oe tay el boasts rs ig oe eaten ae aon athe above 187Caarler Eqervses - Fringe Berepit Tig 9 c " sot - Rice subsidy of two thousand pesos (2,000) or one 4 REED" nn pr mon orang fr more ten to rnd pesos is an exempt de minimis benefit, reverent Employee ocheverant awars, 0. for lent of ‘Service. oF safety achievement, which must be in the form of a tangible personal property other than cash or gif certificate, with an annual ronetary value not exceeding ten thousand pesos recelved by an ‘employee under an‘ established writen plan which does not “iserminate in favor of highly paid employees is an exempt de minimis benefit. '2. Statements 1 and 2 are false . Statement 1 is true but statement 2 is false Statement 1 is faise but statement 2is true 4d. 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 employee ._ Not be considered in determining the P90,000 ceiling of other benefits excluded from the gross income under the Code, as e 4 45, The excess of the de minimis benefits over their respective ceilings prescribed under the regulations shall be ‘2. Considered as part of other benefits subject to tax only on the ‘excess over the P90,000 ceiling, 'b._Not be considered in determining the P82,000 ceiling of other benefits excluded from the gross income under the Code, as amended. &. Botha" and"b" d. Neither “a nor“b" 46. Minimun Wage Eamers (MWEs) receiving “other benefits’ exceeding the 90,000 limit shall be a, Taxable on tho excess benefits only b. Taxable on the excess benefits as woll as his salaries, wages ‘and allowances, just ike an employee receiving compensation income beyond the statutory minimum wage, ‘c.Exempt from income tax 4. None of the above 108 Chapter a Yer Leercives - Cringe Benoit Ue ‘47. The amOUNt of 80,000 ung, from gross income shall “other benefits” which are excluded Shall be arrest types team ae ian ly 4. None of the above 4, “Other Beefs’ under revenue Bonfis nde evo eautns inside Il. Productivity incentive bor Mi, Loyalty awards: ae IV. _ Gifts in cash or in kind and other ber eis of similar nature actualy received by offical government and private ofices vest Bom a. Lonly I tand i 3. Land only 6. T,thland iv 49, Which of the following statements regarding thiteenth (13° month pay is correct? ‘a. Thirteenth (13 month pay and other benefits received by officials and employees of public and private eniiies are ‘exempt from income tax and credible withholding tax on Compensation, provided that the total exclusion shall not exceed P90,000. bb. The excess of de minimis benefits over the celing would form part of an individuals gross income only ifthe total excess benefits including bonuses exceeds 90,000 and would be subject to income tax and applicable fnal withholding taxes ‘c. Statements “a" and “bare correct d._ Neither statement ‘a"nor“b" is correct 50. Pedro, single, is a minimum wage eamer of EDT Manufacturing Corporation’ in acion tis base minmum wage of 144,00 fr 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 ¢. il 169| ” Chapter Eucrsives - Fringe Ber ft Te 51. Pedro, single, is a minimum wage eamer of EDT Manutacturin, Corporation. in action to his baste minimum wage of P144,000 for 2020, he also received the following benefits: = De minimis, P60,000 (P20,000 over the ceiling) * 13" month pay and other benefits, 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 eamer of EDT Manufacturing Corporation. Pedro is also engaged in trading various consumer products every weekend. He derived profit therefrom amounting to P500,000 for 2020 taxable year. In addition to his basic minimum wage of P144,000 for 2020 taxable year, he likewise received the following additional benefits from his employer: * De minimis, P40,000 (all within the ceiling) * 13" month pay and other benefits, P35,000 Pedro's taxable income should be: a. P644,000 c. P500,000 b. P594,000 d. P350,000 190