CHAPTER 6 FRINGE BENEFITS

Fringe Benefit
-any good, service or other benefit granted in cash
or in kind by an employer to an individual employee in
addition to the basic salary, but not limited to the
following:
1.
Housing
2.
Expense account
3.
Vehicle of any kind
4.
Household expense benefits
5.
Interest on loan at less than market rate
benefit
6.
Membership fees benefit
7.
Expenses for foreign travel benefit
8.
Holiday and vacation expenses
9.
Educational assistance to the employee or his
or her dependents
10.
Premium in excess of life, health, and non-life
insurance benefits
Tax treatment of Fringe Benefit
1.
Rank & File
- fringe benefit shall be included in gross taxable
compensation income subject to scheduler tax
rate
2.
Supervisory or Managerial
- fringe benefit tax shall be subject to fringe
benefit tax
Non- taxable fringe benefits
1.
FB authorized and exempt from tax under
special laws
2.
Benefits for retirement, insurance, and
hospitalization benefit plans
3.
Benefits given to rank and file employee
4.
De minimis benefits
5.
FB granted to the employee, that is required
by the nature of, or necessary to, the trade,
business or profession of the employer
6.
FB given to the employee for the
convenience or advantage of the employer

FB exempt from FB tax may still be

subject to a basic tax

De minimis Benefits
-facilities and privileges of relatively small value

1.

Monetized unused vacation leave credits of

employees not exceeding 10 days during the
year
2.
Monetized value of leave credits paid to
government officials and employees
3.
Medical cash allowance to dependents of
employees not exceeding P750 per employee
per semester or P125 per month
4.
Rice subsidy of P1,500 or one sack of 50kg
rice per month
5.
Uniforms and clothing allowance not
exceeding P4,000 per annum
6.
Actual yearly medical benefits not exceeding
P10,000 per annum
7.
Actual yearly medical benefits not exceeding
P10,000 per annum
8.
Laundry allowance not exceeding P300 per
month
9.
Employee achievement award, with an
annual monetary value not exceeding P10,000
10.
Gifts given during Christmas and major
anniversary celebrations not exceeding P5,000
per annum
11.
Company picnics and sports tournaments in
the Phil
12.
Flowers, fruits, books or similar items given
under special circumstances
13.
Daily meal allowance for overtime work not
exceeding 25% of the basic minimum wage
The excess of the de minimis benefits
over their respective ceilings shall be
considered as part of other benefits
Other benefits will be subject to tax
only on the excess over the P30,000
ceiling
Other benefits- amount excluded
from Gross Income
Tax Base & Fringe Benefit tax rate

Grossed-up monetary value (GUMV)

-basis of computing FB tax
= actual value of FB / grossed-up monetary rate

Grossed-up Monetary Rate (GUMR):

a) RC, NRC, RA, NRAETB 68%
b) NRA not ETB 75%
c) Alien employed by regional headquarters,
employed by offshore banking unit, by

service contractor engaged in petroleum

operations in the Phil, or Filipino employee
occupying the same position held by an
alien 85%
d) Employees in special economic zone
68%, 75%, 85% as the case may be

b. Employer has its own residential property

and assigned it for the use of the
employee
MV = 50% x (5% x FMV or ZV
whichever is higher)
c. Employer purchases a property on
installment basis for the use of employee
MV = 50% x (5% x Acquisition cost)

Fringe Benefit Tax Rate (FBTR)

1.
RC, NRC, RA, NRAETB 32%
2.
NRA not ETB 25%
3.
Alien employed by regional headquarters,
employed by offshore banking unit, by service
contractor engaged in petroleum operations in
the Phil, or Filipino employee occupying the
same position held by an alien 15%
4.
Employees in special economic zone 32%,
25%, 15% as the case may be
Treatment of Fringe Benefit Tax
-FBT is a final tax on the employee withheld and
paid by the employer on a quarterly basis
-to compute FBT, monetary value is being grossedup
Basic procedures in computing fringe benefit tax
1.
Classify properly the taxpayer
2.
Determine the correct actual value of the FB
3.
Compute the correct monetary value of the
FB
4.
Compute the GUMV
5.
GUMV x FBTR
Monetary Value of Fringe Benefit
1.
If FB is cash, value is the amount granted for
2.
If FB is property & ownership is transferred,
value = FMV
3.
If FB is property but ownership is not
transferred, value = deprecation value
Specific types of Fringe Benefits
1.
Housing
a. Employer leases a residential unit for the
use of the employee
Monetary value of FB = rental
payment x 50%

d. Employer purchases a residential property

and transfers its ownership to the
employee
MV = 100% of FMV or ZV
whichever is higher

2.

Expense account
MV = 100% x Expenses paid or
incurred

3.

Vehicle of any kind

a. Employer purchase of a motor vehicle on
cash basis in the name of the employee
MV = 100% of Acquisition cost
b. Cash is given to the employee for the
purchase of motor vehicle & ownership is
in the name of employee
MV = 100% x cash received
c. Employer purchase a motor vehicle on
installment basis & transfer its ownership
to the employee
MV = Acquisition cost / 5 years
d. Employer purchases a motor vehicle, but
employee shoulders part of the cost and
acquires its ownership
MV = 100% of the amount
shouldered by employer
e. Employer owns a fleet of motor vehicles
for the use of business and the employees
MV = 50% x (Acquisition Cost / 5
years)

f.

Employer leases and maintains a fleet of

motor vehicle for the use business and
employees
MV = 50% x rental payment
g. Employer purchases or lease a yacht to be
used by employees
MV = 100% x (Acquisition cost / 20
years)
4.

5.

6.

7.

iii.

iv.

v.

Household expense benefits

-personal expenses of the managerial and
supervisory employees, borne by the employer
MV = 100% x household expenses
paid
Interest on loan at less than market rate
benefit
-loans granted by the employer to the employee
with no interest or with interest lower than 12%
a. Loans with no interest or interest lower
than 12%, interest foregone shall be
treated as taxable fringe benefit
b. Benchmark interest rate of 12% shall
remain in effect until revised by a
subsequent regulation
c. This regulation shall apply to installment
payment of loans with interest lower than
12% starting January 1, 1998

Membership fees benefit

-social and athletic clubs or other similar org
MV = 100% x amount paid for fees
or dues
Expenses for foreign travel benefit
MV = 100% x Foreign Travel
Expenses
a. Taxable Travel Benefits
i.
Unreasonable or excessive
business expenses
ii.
Traveling expense of family
members of employee paid by
employer

30% of cost of first-class airplane

ticket incurred due to business
travel
Foreign travel without any
documentary evidence that the
travel was in connection with
business
Cost of lodging in foreign or inland
travel in excess of US$300 per day
supported by documents

b. Non-taxable Tavel Benefits

i.
Reasonable business expenses
except cost of lodging
ii.
Inland travel expense supported by
documentary evidence
iii.
Cost of economy or business-class
is not taxable
iv.
Lodging cost at an average of
US$300 or less per day in foreign
or inland travel shall not be taxable
8.

9.

Holiday and vacation expenses

MV expenses paid = 100% x
Holiday and Vacation
Educational assistance to the employee
or his or her dependents
a. GR: subject to fringe benefit tax
XPN:
i.
When scholarship grant is
connected with the employers
trade, business or profession
ii.
When there is written contract that
employee is obliged to remain in
the company for a period of time
they mutually agreed upon
b. Educational assistance to the dependents
of employee shall be treated as taxable
FB; except when assistance was provided
thru competitive scheme under the
scholarship program of the company

MV = 100 % x Educational
Expenses

10.
Premium in excess of life, health, and
non-life insurance benefits
GR: taxable
XPN:
a. Contributions of the employer under SSS

b. Contributions of the employer under GSIS

c. Cost of premium borne by the employer
for the group insurance of employees