Taxation Review 1

Lecture on Fringe Benefits

FRINGE BENEFITS- any good, service or other benefit furnished or granted by an employer, in cash or in kind, in
addition to basic salary to an individual employee.

Subject to FBT Not Subject to FBT

 Those given to managerial or supervisory
 Those given to rank-and-file employees
position*
 Not subject to FBT, but Those benefits given
 For purposes of determining what a managerial other than those which do not exceed the
position is, the decision-making test may apply. statutory threshold shall be subject to tax under
Normal Income Tax (5%- 32%)

Examples: Examples:
a. De Minimis, non-taxable if not exceeding the
a. Housing
limits, however, any excess of de minimis over
b. Expense Accounts
the statutory limits is added to the “Other
c. Vehicle of any kind
Bonuses” category subject to P 82,000 limit
d. Household personnel
taxable under Normal Tax
e. Interest
f. Membership fees b. those which are required and necessary to the
business of the employer
g. Expense for Foreign Travel
c. those which are for the convenience or
h. Holiday and vacation expenses
advantage of the employer
i. Educational assistance
j. Life or health insurance and other non- life
insurance premium in excess of what the law
allows

 The employer is liable for FBT regardless of

whether he is taxable or not since he is
considered to be the withholding agent.

 The grossed-up monetary value shall be an

expense deductible on the part of the employer,
computed as follows:

32%- FBT since January 1, 2000

GMV= MV/68% (for RC, NRC, RA, and NRAETB)
GMV= MV/75% (for NRANETB)
GMV= MV/85% (for employees in RAH, ROH, OBUs)
– special taxpayers

 The fringe benefit tax shall be 32%, 25% and

15%

Monetary Values
 If Cash, the face amount or value received.

 If Property, wherein the ownership is transferred to the employee, the basis shall be the FMV,
Zonal Value, or Assessed Value, whichever is the HIGHEST.

 If ONLY USUFRUCT (use):

a. Personal Property, FV to be depreciated by 5 years then divided by 2.
b. Real Property, ZV, AV, or FMV, whichever is the highest, to be depreciated by 20 years then
divided by 2.
 If Interest, MV is equal to interest forgone.
 Taxation Review 2
Lecture on Fringe Benefits

*Managerial Employee
 Those who are vested with powers or prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. (Labor Code of The
Philippines)

Supervisory Employee
 Those who, in the interest of the employer, effectively recommend such managerial actions if the exercise
of such authority is not merely routinary or clerical in nature but require use of independent judgment.
(Labor Code of The Philippines)

De Minimis Benefits

Whether rank-and-file or managerial/supervisory employee, the following de minimis benefits shall be

non-taxable:
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 P750 per employee per semester
or P 125 per month;
4. Rice subsidy of P 1,500 or one (1) sack of 50-kg. rice per month amounting to not more than P 1,500;
5. Uniform and clothing allowance not exceeding P 5,000 per annum;
6. Actual yearly medical benefits not exceeding P 10,000 per annum;
7. Laundry allowance not exceeding P 300 per month;
8. Employees achievement awards which must be in the form of a tangible personal property other than
cash or gift certificate, with an annual monetary value not exceeding P 10,000 received by the employee
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 P 5,000 per
employee per annum;
10. Daily meal allowance for overtime work not exceeding twenty-five percent (25%) of the basic minimum
wage.
11. All other benefits given by the employers which are not included in the above enumeration shall not be
considered as “de minimis” benefits, and hence, shall be subject to income tax as well as withholding tax
on compensation.