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FRINGE BENEFITS
Pertain to other benefits or incentives on the
top of the basic pay.
Pertain to goods or services or other benefits
furnished by the employer to employee

RULES ON FRINGE BENEFITS

FRINGE BENEFIT TAX (FBT)

Rank and File employees considered not

taxable under 13th month pay and other
benefits
Managerial and Supervisory employee
excluded in compensation income but subject
to fringe benefit tax

Covers only the taxable fringe benefits of

managerial and supervisory employees.
This is a final tax and not a regular
compensation tax.

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EXEMPT FRINGE BENEFITS

CONVENIENCE AND NECESSITY

Exempt under special laws (SSS, PHIC,HDMF)

Required by the nature of, or necessary to the
trade, business or profession
Benefit given for the convenience of the
employer
Benefits given to rank and file
De minimis benefits

It is an expense necessary for the trade

Furnished principally for the employers
convenience
It is an ordinary expense
Personal advantage of the employee is mere
incidental.

EXAMPLES
OF
CONVENIENCE

EXAMPLES
OF
CONVENIENCE

NECESSITY

AND

Scholarship program for advancement

Car incentives to medical doctors to expedite
presence in emergency cases
Free transportation services working at
distant places
Mobile phone allowances
Sleeping quarters

NECESSITY

AND

Helicopters assigned to fishing employees

Personal aircraft to CEOs
Car incentives to travelling salesmen
Housing units near the employers place

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FRINGE BENEFIT TAX

FBT COMPUTATION (PROCEDURE 1)

Final tax withheld by the employer at source

Employee need not report the fringe benefits
in his income tax return
Tax upon managerial and supervisory
employee
Paid by the employer
Due quarterly (every 10th /15th of month after
every quarter) through BIR Form 1603

Determine the monetary value

FBT COMPUTATION (PROCEDURE 2)

FBT COMPUTATION (PROCEDURE 3)

Determine the gross-up rate and fringe

benefit tax rate

Determine the grossed-up monetary value by

dividing the monetary value by the gross-up
rate.
Considered to be the deductible fringe benefit
expense of the employer.

If tax rate is 32%, then gross up is 68%

This refers to the taxable amount of benefits

and it is presumed net of final tax.

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FBT COMPUTATION (PROCEDURE 4)

ILLUSTRATION 3

Determine the fringe benefit tax by

multiplying the fringe benefit tax rate to the
grossed-up monetary value.

1.
2.
3.

ANSWER TO ILLUSTRATION 3

EXAMPLES OF FRINGE BENEFITS

Determine the following:

Taxable amount of fringe benefit income
Fringe benefit tax
Deductible fringe benefit expenses of the
employer
Cash payment by employer for personal
expenses of the manager (resident citizen)
amounting to Php 170,000.

Housing benefits

Expense account

Vehicles of any kind

Household personnel (maid & drivers)

Interest

Membership fees

Expense for foreign travels

Holiday and vacation expenses

Educational assistance

Life or non-health and other non-life insurance premiums

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VALUATION OF FRINGE BENEFITS

VALUATION OF FRINGE BENEFITS

When paid in cash or paid for in cash

the monetary value is the amount paid for in
cash.
When benefit is paid in kind
the monetary value is the FV or BV, whichever
is higher

When benefit is given in the form of free use

a. the monetary value is 50% of rental value
b. if no rental value, the depreciation value is
used.
20 years for real properties
5 years for movable
When there is transfer of property, the whole FV
or BV is the monetary value

ILLUSTRATION 4

ANSWER TO ILLUSTRATION 4

Compute for the monetary value, FBT and

deductible expense of the following benefits to a
Filipino citizen:
a. Free use of condo unit with a rental value of
Php 500,000
b. Free use of residential unit with FMV of
Php 2M
c. Transfer of Toyota Fortuner with FMV of
Php 1.2 M

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ILLUSTRATION 5

INDEPENDENT CONDITIONS

Maribago Company purchased a residential

condo unit with FMV of Php 2M, zonal value
of Php 1.5 M and acquisition cost of
Php 1.8 M. Assume the following independent
conditions (on the next slide). The said
benefit is furnished to a resident comptroller.
Compute for the monetary value, FBT and
deductible expense during the year.

a. Rental income per month is Php 200,000

b. Assignment of condo unit
c. Transfer of ownership

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RENTAL INCOME PER MONTH IS PHP 200,000

Determine the monetary value

Determine the grossed-up monetary value
Compute for Fringe benefit tax
Compute for the deductible fringe benefit
expense

TRANSFER OF OWNERSHIP

Determine the monetary value

Determine the grossed-up monetary value
Compute for Fringe benefit tax
Compute for the deductible fringe benefit
expense

ASSIGNMENT OF REAL PROPERTY

Determine the monetary value

Determine the grossed-up monetary value
Compute for Fringe benefit tax
Compute for the deductible fringe benefit
expense

EXEMPT HOUSING PRIVILEGES

Military officials of AFP, PAF, PNP
Housing unit adjacent to the premises of the
business (within 50 meters)
Temporary housing for an employee

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SPECIAL GUIDELINES ON EXPENSE ACCOUNT

DOCUMENTED PERSONAL EXPENSE

Expense incurred by an employee but which

are paid by his employer or paid by employee
subject to reimbursement are taxable fringe
benefits.
Monetary value is 100% paid by the employer

When the receipt is under the name of

employer and not a personal expense, it is
considered a business expense.
Personal expenses of the employee such as
groceries, personal consumption are taxable
regardless of the name of the receipt.

ILLUSTRATION 6 DETERMINE MV

ANSWER TO ILLUSTRATION 6

The following expenses are liquidated by a

managerial resident citizen:

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ILLUSTRATION 7
NJ Company purchased a heavy dump truck
on installment amounting to Php 1.5 million
inclusive of interest charges of Php 300,000.
This equipment is placed in the name of their
Chief Operations Officer.
Determine the MV, GMV and FBT of the above
transaction during the year.

Aircrafts including helicopters are deemed

solely for business use
Monetary value is zero, not subject to fringe
benefit tax.

ILLUSTRATION 7.1
Yachts whether owned and maintained or
leased are presumed not for business use.

The following properties owned by Hello

Corporation and are used by Vice President
Admin of the Bank. Determine the MV, FBT
and deductible expense.

Monetary value is acquisition cost multiplied

by 5%.

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HOUSEHOLD EXPENSES

INTEREST ON LOAN AT LESS THAN MARKET VALUE

Employee expenses borne by the employer for

household personnel, salaries of maid,
personal driver, association dues.

The interest foregone by the employer

representing the difference between 12% and
the actual interest charged is a taxable fringe
benefit.

Monetary value is the amount paid.

ILLUSTRATION 8

MEMBERSHIP FEES, DUES IN SOCIAL CLUBS

Mr. NJ Chan lends Php 50,000 to its VP

Operations with an interest rate of 5%.

Monetary value is the amount paid.

Compute for the MV, FBT and deductible

expense.

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FOREIGN TRAVEL EXPENSES

HOLIDAY AND VACATION EXPENSE

Business travels for attending business meetings

and conventions are exempt, except.
Land travel expense food, beverage, local
transportation amounting to average of $300 or
less is exempt
Economy and business class exempt
First class ticket 30% of ticket cost is
presumed fringe benefit.

These are taxable fringe benefit

The monetary value is the amount paid or
shouldered by the employer

EDUCATIONAL ASSISTANCE TO THE EMPLOYEE OR

HIS DEPENDENTS

LIFE OR HEALTH INSURANCE

Generally taxable, except when incurred for

the convenience of the employers business.

These are taxable fringe benefits except the

following insurance:
a. Contributions of the employer for the benefit
of the employee such as SSS, PHIC and
HDMF
b. Cost of premium of group insurance

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END OF PRESENTATION

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