Chapter 11

FRINGE BENEFIT
TAX
 Nature Tax Treatment

Fixed Include all to taxable

income

Variable Include all to taxable

income

TYPES OF FRINGE 13th Month Pay Subject to P90,000.00

threshold
BENEFITS
“Other Benefits” – Subject to P90,000.00
Rank and file threshold

“Other Benefits” – Excluded from taxable

Managerial or income and subject to
supervisory FRINGE BENEFIT
TAX
 FINAL TAX
• It is not a creditable tax, therefore , cannot be
deducted from income tax payable for the
taxable period
• But it can be reported as part of expenses /
allowable deductions from gross income.
CHARACTERISTICS OF
FRINGE BENEFIT TAX TAX UPON THE “OTHER
BENEFITS” OF MGRS AND SUP
EMPLOYEES
• It is not a tax on a specific
entity(employer or employee)
• It is a tax associated with the “other
Note: Fringe Benefits should always be benefits” given to managerial and
given to benefit the employEE. supervisory employees
 CHARACTERISTICS OF
FRINGE BENEFIT TAX

PAID BY THE EMPLOYER

GROSSED-UP TAX
• Tax burden is assumed by the
employER • Any benefit given to the employees are deemed NET OF
FRINGE BENEFIT TAX
• Fringe benefit tax is always computed as follows:
[Monetary Value / (1 - Tax rate)] x Tax rate = Fringe Benefit Tax

DUE QUARTERLY
• Filed and paid on a quarterly basis using BIR FRINGE BENEFIT TAX RATES
Form 1603Q on or before the last day of the
month following the of every quarter. Residents or Citizens 35%
Non-residents Aliens 25%
Benefits Subject to
Fringe Benefit Tax
 • Expense for foreign travel with
• Expense Account exceptions. (Please refer to
textbook.)
• Household personnel
• Holiday and vacation expense
• Interest, for the difference between market
value (12%) and actual interest charged by • Educational Assistance to the
employer. employee or his dependents

• Membership Fees, dues and other social • Life or health and other non-life
organization expenses paid by the employer insurance premiums in excess of
what law obliges

FRINGE BENEFITS MEASURED AT FACE VALUE OF BENEFIT GIVEN

(DEEMED AS PAID IN CASH)
 HOUSING BENEFITS

Case 1: Employer leases a residential property for the employee. (Benefit is the form of free use.)
Monetary Value = 50% of the lease or rent amount
Case 2: Employer owns a residential property and assigns the same to the employee.
(Benefit is the form of free use.)
Annual Monetary Value = 50% x [ higher of the zonal value or assessed value / 20 years ]

Case 3: Employer purchases a residential property on installment basis and assigns the same to the
employee. (Benefit is the form of free use.)
Annual Monetary Value = 50% x [ acquisition cost, net of interest / 20 years ]

Case 4: Employer purchases a residential property and transfer ownership in the name of the employee. (Benefit paid in
kind.)
Monetary Value = [higher of acquisition cost or zonal value – consideration paid by the employee
 VEHICLES OF ANY KIND

Case 1: Employer purchases a vehicle in the name of the employee.(Deemed as paid in cash.)
Monetary Value = cost of the vehicle

Case 2: Employer gives cash to the employee to purchase a vehicle in the name of the employee.
Monetary Value = cash given not subjected to withholding tax on compensation

Case 3: Employer purchases a vehicle on installment basis in the name of the employee. (Benefit paid in kind.)
Annual Monetary Value = Acquisition cost / 5 years

Case 4: Employer shoulders a portion in the purchase of vehicle in the name of the employee. (Benefit paid in cash.)
Monetary Value = amount shouldered by the employer
 VEHICLES OF ANY KIND

Case 5: Fleet of vehicles owned by the employer for the use of the business and the employees. (Benefit is the form
of free use.)
Monetary Value = 50% x [Acquisition cost of the vehicle / 5 years]

Case 6: Fleet of vehicles leased by the employer for the use of the business and the employees. (Benefit is the form
of free use.)
Monetary Value = 50% of the lease amount

Case 7: High Cost Vehicles

• Aircrafts - Not subject to FBT

• Yachts – Subject to FBT
Monetary Value = Depreciable Value / 20 years