FRINGE

BENEFIT
FRINGE BENEFIT TAX

– is a final income tax on the employee which shall be withheld and paid by the
employer on a quarterly basis.
FRINGE BENEFIT

– FRINGE BENEFIT means 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 (except rank and file employees) such as, but
not limited to the following:
1. Housing
2. Expense Account
FRINGE BENEFIT

3. Vehicle of any kind

4. Household personnel, such as maid, driver and others
5. Interest on loan at less than market rate to the extent of the
difference between the market rate and actual rate granted.
6. Membership fees, dues and other expenses borne by the
employer for the employee in social and athletic clubs and
similar organizations
FRINGE BENEFIT

7. Expenses for foreign travel

8. Holiday and vacation expenses
9. Educational assistance to the employee or his
dependents; and
10. Life or health insurance and other non-lire insurance
premiums or similar amounts on excess of what the law
allows.
PERSONS LIABLE

The EMPLOYER (as a withholding agent), whether individual,

professional partnership or a corporation, regardless of whether the
corporation is taxable or not, or the government and its
instrumentalities
TAX RATE : 35% effective Jan 1, 2018

– The 35% tax rate shall be imposed on the Grossed-up monetary

value of the Fringe benefit furnished to an employee (except rank
and file)
Note: If the fringe benefit is required by the nature of, or necessary to
the trade, business or profession of the employer, or when the fringe
benefit is given for the convenience of the employer = Not taxable
fringe benefit
SPECIAL FBT RATES

– NRANEBT 25%
– *Aliens employed by regional HO 15 %
– *Aliens employed by OBU 15%
– *Aliens employed by Petroleum Service Contractors and
Subcontractors 15%
– *Filipino employed occupying same position as above
*If the benefit is already existing prior the effectivity of TRAIN LAW
GROSSED UP MONETARY
VALUE
“GMV” of the fringe benefit shall be determined by dividing the
monetary value of the fringe benefit by the Grossed up divisor. The
Grossed up divisor is the difference between 100% and the
applicable rates.
Grossed-up MV= Monetary value / 65%
FRINGE BENEFITS NOT
SUBJECT TO FBT
1.Fringe benefits not considered as gross income –
a. if it is required or necessary to the business of employer
b. if it is for the convenience or advantage of employer
2. Fringe Benefit that is not taxable under Sec. 32 (B) – Exclusions from
Gross Income
3. Fringe benefits not taxable under Sec. 33 Fringe Benefit Tax:
a. Fringe Benefits which are authorized and exempted under
special laws, such as the 13th month Pay and Other Benefits with the
ceiling of P90, 000.
FRINGE BENEFITS NOT
SUBJECT TO FBT
b. Contributions of the employer for the benefit of the
employee to retirement, insurance and hospitalization benefit
plans;
c. Benefits given to the Rank and File Employees, whether
granted under a collective bargaining agreement or not; and
d. The De minimis benefits – benefits which are relatively
small in value offered by the employer as a means of promoting
goodwill, contentment, efficiency of Employees
FRINGE BENEFITS NOT
SUBJECT TO FBT
– The term “Rank and File Employees” shall mean all employees
who are holding neither managerial nor supervisory position as
defined in the Labor Code
In the case of rank and file employees, fringe benefits other than
those excluded from gross income under the Tax Code and other
special laws, are taxable under the individual normal tax rate.
TAXABLE FRINGE
BENEFITS
HOUSING FRINGE BENEFITS MONETARY VALUE
1. LEASE of residential property 50 % x rental payments
2. ASSIGNMENT of residential property (5% x FMV or ZV whichever is higher) x
50 %
3. Purchase of residential property on (5% x AC) x 50 %
INSTALLMENT
4. Purchase of Residential property FMV OR ZV whichever is higher
ownership transferred to employee
Non taxable Housing Fringe
Benefit
1. Privilege of Armed Forces of the Philippines
2. Housing facility located within 50 meters from business premises
3. Temporary housing = 3 months or less
TAXABLE FRINGE
BENEFITS
MOTOR VEHICLE FRINGE BENEFITS MONETARY VALUE
1. Er LEASES and maintains fleet of cars 50 % x rental payments
2. Er OWNS and maintains fleet of cars (AC/5) x 50%
3. Purchase by INSTALLMENT; (AC/5)
ownership=ee; exclusive of interest
4. Purchase = ownership transferred to AC
employee
5. Cash is given= ownership = ee Cash received
6. Er shoulders certain amount Amount shouldered
TAXABLE FRINGE
BENEFITS
Yacht- subject to FBTx, Monetary Value = ( AC / 20 yrs)
Aircraft- eg., helicopter and airplane = considered for business use,
therefore, not subject to FBTx
TAXABLE FRINGE
BENEFITS
EXPENSE ACCOUNTS ;
To be taxable
a. Expenses paid by employer (receipt should not be in the name
of the employer, and should not be in relation to work)
b. Personal expenses such as groceries consumed by family is
taxable whether or not receipted in the name of the employer.
TAXABLE FRINGE
BENEFITS
HOUSEHOLD EXPENSES
- Expenses of employee for household personnel borne by the
employer
- E.g. expenses paid for maid, drivers, personal guards, home
owener’s association dues
TAXABLE FRINGE
BENEFITS
INTEREST ON LOANS @ LESS THAN MARKET VALUE
MV= (12 % less percentage assumed by employee) x
Principal
TAXABLE FRINGE
BENEFITS
MEMBERSHIP DUES, FEES, AND OTHER EXPENSES for SOCIAL and
ATHLETIC CLUBS
Entire amount paid is subject to FBTx
TAXABLE FRINGE
BENEFITS
EXPENSES OF FOREIGN TRAVEL
1. Inland travel= food, beverage, and local transportation = NOT subject to
FBTx
Lodging= everything in excess of US $ 300/day is TAXABLE
2. AIRFARE
Economy and business class= non taxable
1st class = 30 % of the ticket price is subject to FBTx
NOTE: the above rules will only apply if there are documented evidences
proving that there is work related approved foreign travel. If THERE ARE NO
EVIDENCES, then EVERYTHING will be subject to FBTx
TAXABLE FRINGE
BENEFITS
HOLIDAY AND VACATION EXPENSES
- All expenses relating to holiday and vacation expenses are subject
to FBTx
TAXABLE FRINGE
BENEFITS
HOLIDAY AND VACATION EXPENSES
- All expenses relating to holiday and vacation expenses are subject
to FBTx
TAXABLE FRINGE
BENEFITS
EDUCATIONAL ASSISTANCE
1. Education of the EMPLOYEE
GR: taxable
Except: if a. directly connected to the trade and business of the
employer AND
b. There is a bond (obligation to remain employed for by the
employer for an agreed upon period of time)
TAXABLE FRINGE
BENEFITS
EDUCATIONAL ASSISTANCE
2. Education of the employee’s DEPENDENTS
GR: taxable
Except: if it is provided though competitive scheme under
scholarship program of the Company.
TAXABLE FRINGE
BENEFITS
INSURANCE BENEFIT
Everything that is in excess of what the law requires.
e.g., insurance of the employee’s whole family, insurance of his
house, etc
THANK YOU

Jmc
March 2018