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FRINGE BENEFIT TAX (FBT)FBT is a final withholding tax imposed on the grossed-up monetary value of the fringe benefit furnished, granted or paid by the employer to managerial or supervisory employees, whether such employer is an individual , professional partnership or corporation, regardless of whe...

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FRINGE BENEFIT TAX (FBT)

FBT is a final withholding tax imposed on the grossed-up monetary value of the fringe benefit furnished, granted or paid by the employer to managerial or supervisory employees, whether such employer is an individual , professional partnership or corporation, regardless of whether the corporation is taxable or not, or the government and its instrumentalities. (sec. 33, RA 8424, RR No. 3-98) The term “Fringe Benefit” means any goods, services, or other benefits furnished or grabted by an employer in cash or in kind, in addition to basic salaries, to an individual employee (except rank and file employee) such as but not limited to: 1. 2. 3. 4. 5.

Housing Expense account Vehicle of any kind Household personnel, such as maid, driver and others Interest on loan at less than market rate to the extent of the difference between the market rate and the actual rate granted 6. Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations 7. Holiday and vacation expenses 8. Educational assistance to the employee or his dependents 9. Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows 10. Expenses for foreign travel

The Following are Fringe Benefits NOT subject to FBT: 1. Fringe benefits given to rank and file employees (not subject to FBT but subject to basic income tax) 2. Housing benefits/privilege:  Of military officials of the Armed Forces of the Philippines (AFP).  Which is situated inside or adjacent (within 50 meters from the perimeter of the business premises) to the premises of a business factory.  Which are “temporary” for an employee or for a temporary housing unit of 3 months or less 3. Expenses incurred by the employee which are paid by the employer and expenses paid for by the employee but reimbursed by his employer, provided:  The expenditures are duly receipted for and in the name of the employer  It does not partake the nature of a personal expense attributable to the employee 4. Allowances subject to liquidation (tax exempt allowances)

Allowances not subject to liquidation are taxable Representation and transportation allowances which are fixed in amounts and are regularly received by the employees as part of their monthly compensation (exempt from FBT but subject to basic income tax) 5. Reasonable business travel expenses:  Inland travel expenses (such as expenses for food, beverages and local transportation) during foreign travel.  Lodging cost in a hotel (or similar establishments) amounting to an  

average of 300USD or less per day during foreign travel 

Cost of economy and business class airplane ticket for foreign travel

70% of the cost of first class airplane ticket for foreign travel o Business travel expenses “within the Philippines” are generally assumed to be reasonable in amount. Educational assistance  To the employee, provided: o The education or study is directly connected with the employer’s trade, business or profession; and o There is a written contract between them that the employer for a period of time they have mutually agreed upon  To the dependents of the employee, provided that the assistance was provided through a competitive scheme under scholarship program of the company. Contributions of the employer for the benefit of the employee on the following:  Pursuant to the provisions of existing law, such as under SSS and GSIS  Similar contributions arising from provisions of any other existing law  To retirement, insurance and hospitalization benefit plans The cost of premiums borne by the employer for the group insurance of his employees. Fringe benefits which are/if:  Authorized and exempted from income tax under the Tax Code or under any special law  The fringe benefit is required by the nature of or necessary to the trade, business or profession of the employer  For the convenience or advantage of the employer 

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De Minimis Benefits The following are de minimis benefits under RR10-2008 as amended by RA 10963(TRAIN Law);RR 8-2018, RR 11-2-12, RA 10653, RR 1-2015/RR 32015:

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Monetized unused vacation leave credits of private employees not exceeding 10 days during the year and the monetized value of leave credits paid to government officials and employees. Medical cash allowance to dependents of employees not exceeding P1,500 per employee per semester or P250 per month (RR 11-2018; TRAIN Law) Rice subsidy of P2,000 or 1 sack of 50kg rice per month amounting to not more than P2,000 (RR 11-2018;TRAIN Law) Uniform and clothing allowance not exceeding P6,000 per annum (RR 112018;TRAIN Law) Actual yearly medical benefits not exceeding P10,000 per annum Laundry allowance not exceeding P300 per month Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum any excess shall form part of the “Other Benefits” (RR 10-2008, as amended by RR 5-2011, RR 8-2012 and RR 1-2015) Daily meal allowance for overtime work and night /graveyard shift not exceeding 25% of the basic minimum wage Starting January 1, 2015, benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive schemes, provided, that the total annual monetary value received from the 2 items combined, do not exceed P10,000per employee per taxable year (RR 1-2015)

13th Month Pay and Other Benefits 13th month pay and Other Benefits received by officials and employees of public and private entities not exceeding P90,000 beginning January 1, 2018 under the TRAIN Law (P82,000 from 2015-2017; P30,000 before 2015) are exempt from income tax and creditable withholding tax on compensation income. Amount “in excess of P90,000” (as amended) should form part of an individual’s gross income and would be subject to income tax and applicable creditable withholding taxes. “Other Benefits” under RR 2-98 as amended by RR 3-2015    

Christmas bonus Productivity incentive bonus Loyalty awards Gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices

Excess of De Minimis over the Ceilings & 13th month pay De minimis benefits “conforming” to the Tax exempt; excluded in determining ceiling the P90,000 ceiling of “other benefits” “Excess” of the de minimis benefits Included in determining the P90,000 ceiling of “other benefits” over their respective ceilings Amount in excess of P90,000 is subject to basic income tax.

QUIZZERS

1. STATEMENT 1: A fringe benefit is any goods service or other benefits furnished or granted by an employee in cash or in kind, in addition to basic salaries to individual employee. STATEMENT 2; The term compensation under means all remuneration for services performed by an employee from his employer under an employer-employee relationship unless specifically excluded by the Code. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

2. In general, the applicable rate in computing fringe benefit tax beginning January 1, 2018 is: A. 32% C. 25% B. 30%

D. 35%

3. Based on the preceding number, if the employee is a non-resident alien not engaged in trade or business, the applicable rate is: A. 32% C. 25% B. 30%

D. 35%

4. Which of the following statements is correct? I. Fringe benefit is a form of pay which may be in the form of property, services, cash or cash equivalent to supplement a stated pay for the performance of services under an employeeemployer relationship. II. Fringe benefits subject to FBT cover only those fringe benefits given or furnished to a managerial or a supervisory employee. III. FBT is a final tax imposed on the employee withheld by the employer, computed based on the monetary value of the benefit. IV. FBT is an income tax. Accordingly, the one liable under the law to pay the fringe benefit tax is the employee. V. Fringe benefit subject to FBT shall be included in the income tax return of the employee.

A. I and II only

C. All of the above

B. I, II and IV only

D. None of the above

5. An employer subject to fringe benefit tax may be a/an A. Individual B. General Professional Partnership C. Corporation D. All of the above

6. Fringe benefit tax is computed based on: A. Grossed-up monetary value B. Monetary value C. Gross compensation D. Net compensation

7. STATEMENT 1: The grossing up of fringe benefits was adopted in order to align the tax treatment of fringe benefits with salaries and wages. STATEMENT 2: The grossed-up monetary value of the fringe benefit includes the net amount of money received or the net monetary value of any property received and the amount of fringe benefit tax. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

8. How much is the allowable deduction from business income of a domestic corporation which granted and paid P136,000 fringe benefits to its key officers during 2017 taxable year? A. 0 C. 136,000 B. 64,000 D. 200,000

9. Using the same data in the immediately preceding number, except that the taxable year was 2018, how much is the allowable deduction from business income of the domestic corporation/ A. 0 C. 136,000 B. 64,000 D. 200,000

10. Use the following to answer the next 2 questions: During 2019, Alpha Corporation gave the following fringe employees:  Salaries to rank and file employees P  Salaries to managerial employees  De minimis benefits to rank and file employees  De minimis to managerial employees  Fringe benefits to rank and file employees  Fringe benefits to managerial employees

benefits ti its 1,000,000 1,800,000 54,400 27,200 102,000 170,000...