5. Fringe benefit tax (problems and solution) PSBA PSBA PDF

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REVIEW QUESTIONSProblem 1: Determine if the following incomes are subject to basic tax, fringe benefit tax or exempt from tax by putting a check mark in the column provided below. If the value of the benefit is provided, indicate the correct amount. Amount Subject to FBT Subject to Basic TaxExempt O...

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REVIEW QUESTIONS Problem 1: Determine if the following incomes are subject to basic tax, fringe benefit tax or exempt from tax by putting a check mark in the column provided below. If the value of the benefit is provided, indicate the correct amount. Amount Subject to FBT Subject to Exempt Basic Tax 1. Officer’s expense account not subject to liquidation P120,000 2. Officer’s expense account subject to liquidation 80,000 3. Personal expenses of the company officers, paid for or 50,000 reimbursed by the company-employer 4. Annual uniform allowances granted to an executive 5,000 5. Housing benefits of officials of the Philippine Army 360,000 6. Housing benefits of officials of a domestic corporation 250,000 7. Housing unit furnished to an employee, where said unit 45,000 was situated inside or adjacent to the premises of the business 8. Monetized unused vacation leave credits not exceeding 15,000 10 days 9. Household personnel benefit by an officer of a domestic 60,000 corporation 10. Annual medical cash allowance to depending 1,500

Problem 2: (FBT) MRU Company (a domestic employer/company) granted Ms. MHLCO (a Filipino branch manager employee), in addition to her basic salaries, P5,000 cash per quarter for her personal membership fees at Country Golf Club. Required: The Fringe Benefits Tax (FBT) shall be______

5,000 65%

x 35%

2,692

Problem 3: Same facts (Problem 2) but the employee is nonresident alien individual not engaged in trade or business within the Philippines.

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Required: The Fringe Benefits Tax (FBT) shall be______

5,000 75%

x 25%

1,667

Problem 4: Mr. Santos, accounting manager of ABC Corporation, provided the following data for 20x20 taxable year: Salaries @ P120,000 per month P1,440,000 Allowances subject to liquidation 50,000 Allowances not subject to liquidation 60,000 Rice allowance at P3,000 a month 36,000 Christmas gift 30,000 240,000 13th month pay and mid-year bonus Productivity incentive pay covered by a CBA 25,000 Monetized unused vacation leave for 12 days 66,000 Monetized unused sick leave for 5 days 27,500 Medical cash allowance to dependents 3,000 Actual medical benefits 10,000 Creditable withholding tax on compensation income 397,150 Required: 1. How much is the amount of exempt de minimis benefits? A. P97,000 B. P107,000 C. P118,000 D. P124,500

Rice allowance @P2,000 a month only C hristmas gift Monetized unused vacation leave for 10 days Medical cash allowance to dependents Actual medical benefits Tootal exempt de minimis

24,000 5,000 55,000 3,000 10,000 97,000

2. How much is the amount of de minimis and other benefits subject to basic tax? B. P250,500 C. P251,500 D. P280,000 A. P240,500

Rice allowance C hristmas gift 13th month pay and mid-year bonus Productive incentive pay Monetized unused vacation leave Monetized unused sick leave for 5 days Medical cash allowance to dependents Actual medical benefits

Amount 36,000 30,000 240,000 25,000 66,000 27,500 3,000 10,000

Exempt 24,000 5,000 90,000 55,000 3,000 10,000

Total

Excess 12,000 25,000 150,000 25,000 11,000 27,500 250,500

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

Productivity incentive pay under BIR Ruling No. 293-2015  If not more than P10,000 – considered an exempt de minimis  If more than P10,000 – the entire amount shall be included in the “other benefits” with P90,000 ceiling

 

Allowance subject to liquidation non-taxable income of Mr. Santos but part of ABC’s operating expenses. Allowance not subject to liquidation: taxable “fringe benefit”, a final tax. Thus, no longer presented in the computation of income tax payable using the graduated tax rate. Christmas gift in the amount of P5,000 is included in the list of deminimis benefits.



3. How is the fringe benefit tax? A. P48,000 B. P80,000

C. P32,308

D. P166,400

FBT for the allowance not subject to liquidation =P60,000/65%x35%=P32,308 4. How much is the income tax payable of Mr. Santos for the year? A. P130,000 B. P267,500 C. P397,150

Income tax due (TRAIN law, graduated rate) First P800,000 In excess of P800,000 x 30% = P890,500 x 30% Total Less: C WTax Inocme tax payable

D. P0

130,000 267,150 397,150 (397,150) -

5. How much is the total allowable deduction from business income of ABC Corporation in relation to the information provided? A. P1,900,000 B. P1,500,000 C. P1,987,500 D. P2,019,708

Salaries @ P120,000 per month 1,440,000 Allowances subject to liquidation 50,000 Allowances not subject to liquidation 60,000 Rice allowance at P3,500 a month 36,000 C hristmas gift 30,000 13th month pay and mid-year bonus 240,000 Productivity incentive pay covered by a C BA 25,000 Monetized unused vacation leave for 12 days 66,000 Monetized unused sick leave for 5 days 27,500 Medical cash allowance to dependents 3,000 Actual medical benefits 10,000 Fringe benefit tax 32,208 Total OPEX of ABC 2,019,708

The fringe benefit tax shall form part of the operating expenses of ABC Corporation.

Problem 5: (Final Tax) The following information are presented to you in connection with the determination of the fringe benefits tax of the general manager of Jasmin Merchandising: Paid by the company with official receipts in the name of the company: a) Laptop computer for manager’s office use, P80,000 b) Air-conditioning unit for manager’s office use, P30,000 c) Groceries for manager’s family consumption, P10,000 d) Plumbing materials for use in the repair of manager’s residential house, P5,000 Paid by the manager with official receipts in the name of the company:

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a) b)

Purchase of clothes and shoes for the manager’s wife, P15,000 Samples of merchandise sold in the competitor’s store for marketing study, P12,000

Additional Information: Acting on the information given by Jasmin Merchandising, the government seized and confiscated smuggled goods with a fair market value of P40,000,000. How much is the total final tax? 10,000 5,000 15,000 30,000 Divide 65% X 35% 16,154

1,000,000 10% 100,000

Answer P116,154

Problem 6: (Nontaxable and Taxable Fringe Benefits) Miss Mabukol, as the head of office, received the following fringe benefits during the taxable year: Car Uniform and clothing allowance Rice subsidy (P3,000 per month) Employee achievement award (in kind) Laundry allowance (P300 per month) Medical allowance to dependents (P4,250 per semester) Actual medical benefits

P214,000 6,800 36,000 10,000 3,600 8,500 10,000

Required: Compute the following: 1. Nontaxable fringe benefits 2. Fringe benefit tax

Correction Rice subsidy (P1,000 per month) Should be Rice subsidy (P3,000 per month) 1.

12,000 36,000

Rice subsidy Nontaxable uniform and clothing allowance Employees achievement award Nontaxable medical allowance to dependents (P1,500 x 2) Laundry allowance Actual medical benefits Total nontaxable fringe benefits

P24,000 6,000 10,000 3,000 3,600 10,000 P56,600

Note: The new BIR interpretation is that the excess of the actual fringe benefit given shall be taxable after deducting the de – minimis threshold amount. The excess amount of fringe benefit shall be subject to withholding tax on wages whether the recipient employee is a rank-in-file or managerial employee.

2.

Car Divided by grossed-up rate Grossed-up monetary value Multiplied by FBT rate Fringe benefit tax

a. Monetized unused vacation leave credits of private employees

b. Monetized unused vacation and sick leave credits of government employees

P214,000 65 % P329,231 35% P115,231 Private employees: Vacation leave – exempt up to 10 days Vacation leave exceeding 10 days as well as payment of sick leave, regardless of number of days shall be added to “other benefits” with a P90,000 ceiling. Any amount exceeding the P90,000 ceiling shall be subject to basic and creditable withholding tax on compensation income (R.R. No. 8-2000) Government employees: Vacation and Sick leave are always tax exempt regardless of the number of days

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c. Medical cash allowance to dependents of employees d. Rice subsidy e. Uniforms and clothing allowance f. Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/executive check up, maternity assistance, and routine consultation g. Laundry allowance h. Employee achievement awards under an established written plan which does not discriminate in favor of highly paid employees (e.g. for length of service or safety achievement) i. Gifts given during Christmas and Major Anniversary Celebrations j. Daily meal allowance for overtime work* k. Benefits received by virtue of Collective Bargaining Agreement (CBA) and productivity incentive scheme

Not exceeding P1,500 per semester or P250 per month P2,000 or one sack of 50-kg rice per month amounting to not more than P2,000 Not exceeding P6,000 per annum Not exceeding P10,000 per annum

Not exceeding P300 per month In the form of tangible personal property other than cash or gift certificate with an annual monetary value not exceeding P10,000

Not exceeding P5,000 per employee per annum Not exceeding 25% of the basic minimum wage on a per region basis. (RR. 5-2011) Not exceeding P10,000 per employee per annum (R.R. 1-2015)

Problem 7: (Comprehensive Problem) Violeta, a branch manager of San Miguel Corporation since year 200A, received a total annual salary of P360,000. She also received a free housing benefit with monthly rent of P12,240 and fixed monthly meal allowance of P2,000 considered as part of her compensation income. In 200B, her salary and fringe benefits has been increased by 10%. During the year, in addition to her previous fringe benefits the following cash benefit were extended to her by the corporation. a. b. c.

Educational assistance for her dependents amounting to P136,000 This was availed through a rigorous competitive scheme. Employee achievement awards, P10,000. Lions Club membership fee, P20,400.

Required: Compute the following: 1. 200B taxable amount of fringe benefits subject to FBT. 2. 200B fringe benefit tax. 3. 200B deductible amount of fringe benefits from her gross income. 1.

Housing benefit (P12,240 x 110%) Lions Club membership fee Total Divided by grossed-up rate Taxable amount of FB

P13,464 20,400 P33,864 65% P52,098

2.

Fringe benefit tax (P52,098 x 35%)

P18,234

3.

Violeta Vicente cannot deduct the FBT from her gross income. San Miguel Corporation, however, can deduct the entire amount of grossed-up monetary value amounting to P49,800 from the gross income of the corporation as fringe benefit expense.

Problem 8: (Convenience of the employer rule) Mr. A is the plant manager of ABC Company. During the year, he received P220,000 as salary. In addition, he was given free meals with value of P33,000 and living quarters of P22,500. Required: 1. How much is the taxable compensation income of Mr. A? 2. Suppose the factory operated on a 24-hour basis and Mr. A was required to live within the factory compound ( with free meals and lodging), for the convenience of the employer. How much is the taxable compensation income? Answer 1. P275,500 2. P220,000

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Problem 9: (Rental) During the year 20X1, ABC Corporation paid for the monthly rental of a residential house of its branch manager, Mr. L, amounting to P68,000. Required: Prepare the necessary journal entries. Value of the benefit MV of the benefit 68,000 50% 34,000 65% 35% 18,308 FB expense 68,000 FB tax 18,308 Cash 68,000 FB tax payable 18,308

Problem 10: (Acquisition Cost > FMV) XYZ Corp. owns a condominium unit. During the year 20X1, the said corporation furnished and granted the said property for the residential use of its Assistant Vice President. The fair market value of the property per BIR amounts to P10,000,000 while its fair market value as shown in its current Real Property Declaration amounts to P8,000,000. (Assuming the acquisition cost of the residential property is P15,000,000). Required: Prepare the necessary journal entries. Value of the benefit MV of the benefit 10,000,000 5% 50% 250,000 65% 35% 134,615 FB tax 134,615 FB tax payable 134,615

Problem 11: (Acquisition Cost < FMV) Using the same data in problem no. 2 above and assuming that the acquisition cost of the residential property is P7,000,000 and the remaining useful life is 15 years. Required: Prepare the necessary journal entries. Value of the benefit MV of the benefit 10,000,000 5% 50% 250,000 65% 35% 134,615 FB tax 134,615 FB expense 200,000 (10M - 7M) FB tax payable 134,615 Income constructively 200,000

Problem 12: (Transferred: Selling Price < FMV) In 20X1, MNO Corporation purchased a residential house and lot for P2,300,000. The property was sold to the President of the corporation for P1,980,000. The fair market value per BIR and per Assessor’s Office were P2,500,000 and P2,607,000 respectively. Required: How much was fringe benefits tax, if any?

Excess

FB tax

2,607,000 (1,980,000) 627,000 65% 35% 337,615

Problem 13: (Transferred: No Consideration) A house and lot were owned by PQR Laundry Corporation. The ownership of the said house and lot was transferred to its President S, in 20X1. The following data were made available: Cost

P5,000,000

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Fair market value per BIR 4,500,000 Fair market value per Assessor’s Office 3,000,000 Required: How much was the fringe benefits tax? 5,000,000 65% 35% 2,692,308

Problem 14: (Purchase on installment for the use other than rank and file) TUV Corporation bought a residential property in installment for the use of its President. The total amount paid by the corporation was P5,500,000 (inclusive of P500,000 interest.). Required: How much was the fringe benefits tax?

5,000,000

5%

50%

125,000 65% 35% 67,308

Problem 15: (Acquired by company and used by Manager or Supervisor) . In 20X1, W Shop, sole proprietorship, purchased a motor vehicle for the use of its Manager, Dr. Y. It was registered in Dr. Y’s name. The cost of the vehicle was P400,000. The vehicle was used partly for the benefit of the company. Required: How much is the fringe benefits tax? Problem 16: (Vehicles not used in Business) Z Drop, maker of the best-selling ice cream, owns a fleet of motor vehicles for use of the business and its employees. One of the motor vehicles costing P450,000 is not used for business purposes, but for the employees’ personal needs. Required: How much is the annual fringe benefits tax? Problem 17: (Yacht, Helicopter and Airplane Benefits) XYZ Group of Corporation owns and maintains a yacht, a helicopter and an airplane which are used by one the board of director for pleasure and business purposes. Some data available are as follows: Acquisition cost Estimated life Yacht P17,000,000 30 years Helicopter 5,440,000 25 years Airplane 8,840,000 30 years Required: How much is the amount of annual fringe benefits tax? 1

(400,000 /65% x 35%)

2

(450,000 / 5 x 50%) / 65% x 35%

3

17 M / 20

(850,000 / 65% x 35%)

215,385 24,231 457,692

p

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