Taxation (Fringe Benefit Tax)

Question 1

All remuneration for services performed by an employee for his employer under an employee -employer relationship.

Salaries,wages, emoluments, honoraria, allowances, commission, etc.

Answer 1

Compensation

Question 2

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.

Answer 2

Fringe Benefit

Question 3

Monetary burden imposed by the sovereignty on 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

Covers only those fringe benefits given or furnished to a managerial or supervisory employee.

Final tax imposed on the employee withheld by the employer computed at 35% on the Grossed -Up Monetary Value.

Answer 3

Fringe Benefit Tax

Question 4

Items of Fringe Benefits subject to Tax

Answer 4

1Housing

2Expense account

3Vehicle of any kind

4Household personnel

5Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted.

6Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs and similar organizations.

7Expenses for foreign travel.

8Holiday and vacation expense.

9Educational assistance to employee or his dependent

10 Life or health insurance and other non-life insurance premiums or similar amounts in excess of what law allows

Question 5

Illustration
Ana was hired by Earl to be the latter’s secretary and personal assistant. To enable her to perform her duties well, Earl provided a condo unit ( adjacent to the office) which Ana could use as her temporary residence. Is the fair market value of the use of condo by Ana a fringe benefit that is subject to Fringe Benefit Tax?

Answer 5

ANSWER: NO. Ana is neither a managerial or supervisory employee.

Question 6

Tax-exempt Fringe Benefit

Answer 6

1Fringe Benefits which are authorized and exempted from income tax under any special law such as;
Contributions required under SSS law
Contributions required under GSIS law
Similar contributions under an existing law
Premiums for group insurance and employees.

2 If the grant of fringe benefits to the employee is required by the nature of, or necessary to the trade, business or profession of the employer.

3. De minimis benefit
4. If the grant of the benefits is for the convenience or advantage of the employer.

Question 7

percentage of “Monetary Value” in Citizen, Resident Alien, NRA-ETB and NRA- NETB

Answer 7

Citizen, Resident Alien, NRA-ETB = Pxxx
NRA- NETB = Pxxx`

Question 8

percentage of “Divided by gross monetary value factor” in Citizen, Resident Alien, NRA-ETB and NRA- NETB

Answer 8

Citizen, Resident Alien, NRA-ETB = 65%
NRA- NETB = 75%

Question 9

percentage of “Grossed up monetary value” in Citizen, Resident Alien, NRA-ETB and NRA- NETB

Answer 9

Citizen, Resident Alien, NRA-ETB = Pxxx
NRA- NETB = Pxxx

Question 10

percentage of “X FBT Rate “ in Citizen, Resident Alien, NRA-ETB and NRA- NETB

Answer 10

Citizen, Resident Alien, NRA-ETB = 35%
NRA- NETB = 25%

Question 11

percentage of “Fringe Benefit Tax” in Citizen, Resident Alien, NRA-ETB and NRA- NETB

Answer 11

Citizen, Resident Alien, NRA-ETB = Pxxx
NRA- NETB = Pxxx

Question 12

Determine the grossed-up monetary value and fringe benefit tax of the following for the taxable year:

39,000 grocery allowance for personal consumption of an executive of ABC Corporation.

Answer 12

ANSWER: 39,000/ 65% = 60,000 X 35% = 21,000

Question 13

Determine the grossed-up monetary value and fringe benefit tax of the following for the taxable year:

40,800 grocery allowance for the personal consumption of one ABC Corporation’s rank and file employee

Answer 13

ANSWER: 40,800 (same with monetary value) FBT= 0

Question 14

Facilities and privileges such as entertainment, medical services, or so called courtesy discounts on purchase furnished or offered by an employer to his employees are not considered as compensation subject to income tax and consequently to withholding tax , if such facilities or privilege are of relatively small value and are offered by employer merely as means of promoting the health, goodwill and contentment of his employees.

Answer 14

De Minimis Benefit

Question 15

11 De Minimis Benefit

Answer 15

1.Monetized unused vacation leave credits of private employees not exceeding “10 days” during the year.

2.Monetized value of vacation and sick leave credits paid to government officials and employees.

3.Medical cash allowance to dependents of employees not exceeding P1,500 per semester or P250 a month.

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

5.Uniforms given to employees by the employer not exceeding P6,000 per annum.

6. Actual medical assistance given not exceeding P10,000 per annum such as medical allowance to cover medical and health care needs, annual medical/ executive check-up, maternity assistance and routine consultation.
7. Laundry allowance not exceeding P300 per month.
8. 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 P10,000 under an established written plan which does not discriminate in favor of highly paid employees.
9. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum.
10. Daily meal allowance for overtime work and night/graveyard 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 night/ graveyard shift.
11. Benefits received by an employee by virtue of a collective bargaining agreement and Productivity incentive schemes provided that the total annual monetary value received from the two items above combined do not exceed P10,000 per employee per taxable year.

Question 16

Excess of De Minimis Benefits over their respective ceiling

Answer 16

The excess shall be considered as part of “ Other Benefits” subject to tax only on the excess over 90,000 ceiling

All other benefits given by employers which are not included in the enumeration of de minimis benefits shall no be considered De Minimis Benefit but should fall under the classification of “other benefits” and is therefore subject to the P90,000 ceiling.

Question 17

Excess of De Minimis Benefits over their respective ceiling

The excess shall be considered as part of “ Other Benefits” subject to tax only on the excess over________ ceiling

Answer 17

P90,000

Question 18

Excess of De Minimis Benefits over their respective ceiling

All other benefits given by employers which are___________________________________________________________________________________________________________________________________________________________.

Answer 18

not included in the enumeration of de minimis benefits shall no be considered De Minimis Benefit but should fall under the classification of “other benefits” and is therefore subject to the P90,000 ceiling.

Question 19

90,000 ceiling

Answer 19

13th month pay and other benefits received by officials and employees of public and private entities are exempt from income tax and creditable withholding tax on compensation provided that it shall not exceed P90,000.

The exclusion from gross income is not applicable to self-employed individuals and income generated from business.

Question 20

90,000 ceiling

_______________ and other benefits received by officials and employees of public and private entities are exempt from income tax and creditable withholding tax on compensation provided that it shall not exceed P90,000.

Answer 20

13th month pay

Question 21

Other benefits

Answer 21

Christmas bonus
Productivity incentive bonus
Loyalty awards
Gifts in cash or in kind

Question 22

Benefits

Answer 22

Taxable Fringe Benefits

De Minimis Benefits(regardless of rank)

13th Month Pay and Other Benefits(regardless of rank)

Question 23

Under of the Taxable Fringe Benefits

Answer 23

Rank and File –> Subject to graduated rate

Managerial or Supervisory –> Subject to FBT

Question 24

Under of the De Minimis Benefits(regardless of rank)

Answer 24

Within the ceiling —> Exempt

In excess of the ceiling —–> 13th Month Pay and Other Benefits(regardless of rank)

Question 25

Under of the 13th Month Pay and Other Benefits(regardless of rank)

Answer 25

1st P90,000 —–> Exempt

In excess of P90,000 —> Subject to graduated rate

Question 26

it is received by a public officer or employee or officer or employee of a private entity in addition to the regular compensation, fixed for his position or office, is compensation subject to income tax and consequently, creditable withholding tax on compensation income.

Answer 26

Fixed or variable allowances

Question 27

Any amount paid specifically, either to be incurred by the employee in the performance of his duties are not compensation subject to withholding if the following conditions are satisfied;

Answer 27

1.It is for ordinary and necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade, business or profession and

2.The employee is required to account or liquidate for the foregoing expenses in accordance with the specific requirements of substantiation for each category of expenses.

Question 28

Granted to certain officials and employees of the government and are considered reimbursements for the expenses incurred in the performance one’s duties rathtthan as additional compensation. However the excess of RATA if not returned to the employer, constitutes taxable compensation income of the employee.

Answer 28

Representation and Transportation Allowance

Question 29

Not subject to fringe benefit tax and tax on compensation on the basis that communication allowance is deemed required by the nature of the job of the employees and deemed necessary to business and resounds to the convenience and benefits.

Answer 29

Communication Allowance

Question 30

SPECIAL RULES IN COMPUTING THE MONETARY VALUE OF FRINGE BENEFITS

MONETARY VALUE OF HOUSING BENEFITS (ALL)

Employer leases a residential property for the use of the employee
Monetary Value:__________________

Employer owns a residential property for the use of the employee
Monetary Value:__________________

Employer purchases residential property in installments for the use of the employee
Monetary Value:__________________

Employer purchases residential property and transfers ownership to employee
Monetary Value:__________________

mployer purchases residential property and transfers ownership to employee on the lesser amount
Monetary Value:__________________

Answer 30

Monetary Value: Rental paid x 50%

Monetary Value: The higher between FMV in the Real property declaration or Zonal value x 5% x 50% **

Monetary Value: Acquisition cost, exclusive of interest x 5% x 50% ***

Monetary Value of the Benefit : The higher between the acquisition cost or Zonal value as determined by the CIR

Monetary Value: The higher between the FMV in the real property declaration or Zonal as determined by the CIR less cost to the employee

Question 31

SPECIAL RULES IN COMPUTING THE MONETARY VALUE OF FRINGE BENEFITS

MONETARY VALUE OF HOUSING BENEFITS

**Annual Benefit =
Monetary Value =

Answer 31

**Annual Benefit = FMV or Zonal, whichever is higher x5%
Monetary Value = FMV or Zonal, whichever is higher x5% x 50%

Question 32

SPECIAL RULES IN COMPUTING THE MONETARY VALUE OF FRINGE BENEFITS

MONETARY VALUE OF HOUSING BENEFITS

***Annual Benefit =
Monetary Value =

Answer 32

***Annual Benefit = The acquisition cost executive of interest x 5%
Monetary Value = The acquisition cost executive of interest x 5% x 50%

Question 33

SPECIAL RULES IN COMPUTING THE MONETARY VALUE OF FRINGE BENEFITS

MONETARY VALUE OF MOTOR VEHICLE(ALL)

1) Employer owns and maintains a fleet of
motor vehicles for the use of the business
and employees
Monetary Value: ____________________

2) Employer leases/maintains a fleet of motor vehicles for the use of the business and the employees
Monetary Value: ____________________

3) Employer purchases vehicle in the name of employee.
Monetary Value: ____________________

4) Employer provides employee with cash for the purchase of the vehicle, and ownership is placed in the name of the employee.
Monetary Value: ____________________

5) Employer purchases the vehicle on installment and ownership is placed in the name of the employee.
Monetary Value: ____________________

6) Employer shoulders a portion of the amount of the purchase price of vehicle and ownership is placed in the name of the employee.
Monetary Value: ____________________

Answer 33



Monetary Value: Acquisition cost of vehicles not normally used for business divided by 5 years x 50%

Monetary Value: Amount of rental payments not normally used for business purposes x 50%

Monetary Value: Acquisition cost

Monetary Value: Cash received

Monetary Value: Acquisition cost exclusive of interest divided by 5 years

Monetary Value: Amount shouldered by employer

Question 34

In 2023, a domestic corporation paid for the monthly rental of a residential house of its branch manager, Mr. Juan dela Cruz, amounting to P156,000. Assume there is no transfer of ownership.

Q1 : What is the monetary value of the benefit?

Answer 34

A1: (156,000 x 50%) P78,000

Question 35

In 2023, a domestic corporation paid for the monthly rental of a residential house of its branch manager, Mr. Juan dela Cruz, amounting to P156,000. Assume there is no transfer of ownership.

Q2: What is the grossed-up monetary value of the benefit?

Answer 35

A2: (78,000 ÷ 65% ) P120,000

Question 36

In 2023, a domestic corporation paid for the monthly rental of a residential house of its branch manager, Mr. Juan dela Cruz, amounting to P156,000. Assume there is no transfer of ownership.

Q3: How much is the fringe benefit tax?

Answer 36

A3: (120,000 x 35%) P42,000

Question 37

In 2023, a domestic corporation paid for the monthly rental of a residential house of its branch manager, Mr. Juan dela Cruz, amounting to P156,000. Assume there is no transfer of ownership.

Q4: Total amount deductible by the employer from its gross income?

Answer 37

A4: (42,000 + 156,000) P198,000