CHAPTER 3 – FRINGE BENEFITS

PROBLEM SOLVING
P3.1
Subject to FBT Subject to Basic Tax Exempt
1. P120,000 - -
2. - - P80,000
3. 50,000 - -
4. - - 6,000/ yr. (RR 8-2018)
5. - - 360,000
6. 250,000 - -
7. - - 45,000
8. - - 15,000
9. 60,000 - -
10. - - 1,500
11. - - 1,500

P3.2
a) Yes
b) GUMV = P325,000/65%=P500,000
c) No. FBT is a final tax, hence, nonreturnable
d) FBT = P500,000 x 35% = P175,000
e) Within 10th day of the month following the end of the calendar quarter in which the fringe benefits were granted to the
recipient. f) No. It is subject to basic tax instead of FBT.

P3.3 P963,000 computed as follows:

Compensation income P900,000
Monthly transportation allowance** 36,000
De Minimis Other Benefits
Benefits
13th month pay - P75,000
Productivity incentive pay (de minimis under RR 1-2015) 10,000 -
Christmas bonus (P5,000 de minimis under RR 1-2015) 5,000 20,000
Uniform allowance (16,000-6,000) 6,000 10,000
Medical allowance (entire amount is de minimis) 10,000 -
Rice subsidy [36,000-(2,000 x 12)] 24,000 12,000
Total (known as 13th Month Pay & Other Benefits) 117,000
Tax Exempt 13th Month Pay & Other Benefits; TRAIN Law (90,000) 27,000
Taxable income P963,000
**Fixed Allowances received regularly(transportation allowance) shall be treated as part of basic compensation
income
Productivity incentive pay not exceeding P10,000 shall be exempt de
minimis Christmas Gift/Bonus = 1st P5,000 shall be exempt de minimis

P3.4 P983,000 computed as follows:

Compensation income P900,000
Monthly transportation allowance** 36,000
De Minimis Other Benefits
Benefits
13th month pay - P75,000
Productivity incentive pay (BIR Ruling No. 2932015) 20,000
Christmas bonus (P5,000 de minimis under RR 1-2015) 5,000 20,000
Uniform allowance (16,000-6,000) 6,000 10,000
Medical allowance (entire amount is de minimis) 10,000 -
Rice subsidy [36,000-(2,000 x 12)] 24,000 12,000
Total (known as 13th Month Pay & Other Benefits) 137,000
Tax Exempt 13th Month Pay & Other Benefits; TRAIN (90,000) 47,000
Law Taxable income P983,000
 **Fixed Allowances received regularly(transportation allowance) shall be treated as part of basic compensation income
 BIR RULING No. 293-2015 provides that Productivity incentive if more than P10,000 shall not be treated as de minimis
benefit. The entire amount shall be included as part of “other benefits”
 Christmas Gift/Bonus = 1st P5,000 shall be exempt de minimis

P3.5 P540,000 computed as follows:

Compensation income P540,000
De Minimis Taxable
Benefits Benefits
13th month pay and mid-year bonus P67,500
Christmas gift or bonus P5,000 5,000
Uniform allowance (7,500-6,000) 6,000 1,500
Actual Medical allowance (P15,000-10,000) 10,000 5,000
Medical allowance to dependents (P2,000-1,500) 1,500 500
Rice subsidy [entire amount is de minimis]; max. of P24k per 18,000 -
year
Monetized vacation leave [24,000-(2,000x 10)] 20,000 4,000
Total 13th Month Pay & Other Benefits 83,500
Tax Exempt 13th Month Pay & Other Benefits; TRAIN 90,000 -
Law Taxable income P540,000

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P3.6
1.
a) P165,000 x 50% = P82,500 4.
b) P82,500/65% x 35% = a. P1,200,000
P44,423 b. P1,200,000/65% x 35% =
P646,154
2. 5.
a. P4.5M x 5% /4 x 50% = a. P800,000
P28,125 b. P800,000/65% x 35% =
b. P28,125/65% x 35% = P430,769
P15,144 6.
3. a. P1,200,000/5 = P240,000
a. P4.5M b. P240,000/65% x 35% =
b. P4.5M/65% x 35% = P129,230
P2,423,077

TRUE OR FALSE

1. FALSE 6. FALSE 11. FALSE

2. FALSE 7. TRUE 12. TRUE

3. TRUE 8. TRUE 13. TRUE

4. TRUE 9. TRUE 14. TRUE

5. TRUE 10. TRUE 15. TRUE

MODIFIED
IDENTIFICATION
1. B 6. B 11. A 16. A

2. B 7. B 12. A 17. B

3. A 8. B 13. B 18. B

4. B 9. B 14. A 19. B

5. B 10. B 15. B 20. B

MULTIPLE CHOICE

1. C 11. C 21. A 31. B 41. C

2. A 12. A 22. D 32. A 42. D

3. D 13. A 23. C 33. D 43. D

4. D 14. B 24. D 34. A 44. A

5. D 15. B 25. A 35. C 45. A

6. D 16. D 26. D 36. C 46. A

7. B 17. C 27. B 37. D 47. B

8. A 18. B 28. D 38. B 48. D

9. D 19. C 29. B 39. D 49. A

10. C 20. D 30. D 40. D 50. D

51. D

52. C

Supporting Computations (Multiple

Choice):
#7
Letter “B” is subject to FBT. To be exempt from FBT, the benefit granted shall be for the convenience of the “employer”. This is on
the assumption that the employee is holding managerial or supervisory position.
Letter “D” is exempt. Rice allowance up to P2,000 per month is de minimis.

#21. P97,500/65% = P150,000

(22)
To managerial – fringe benefit expense P1,300,000
Fringe benefit tax expense (P1.3M/68% x 35%) 700,000
Rank and File 5,000,000
Total P7,000,000

(23)
Expenditure attributable to Managerial employees

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 (P1.2M x 20%) P240,000
Divide by GUMVF 65%
Grossed-up monetary value P369,231 x FBT rate 35%
Fringe Benefit Tax P129,231

(24) Total deductible expense = P1,200,000 + 129,231 = P1,329,231 (25)

Salaries and wages gross of CWT P816,000
Fixed monthly allowance** 60,000
Total compensation income subject to graduated rate P876,000
*Fixed Allowances received regularly per payroll are considered part of regular compensation subject to graduated rate (RR 10-
2008)

(26)
Allowance not subject to liquidation P48,000
Divide by GUMVF 65%
GUMV P70,588 x FB rate 35%
FBT P25,846

(28)
Annual rental P637,500 x 50%
Monetary value of housing benefit P318,750
Divide by GUMVF 65%
GUMVF P490,385
X FBT rate 35%
FBT P171,635
Add: Annual Rental 637,500
Total Deductible Expense P809,135

(29) (32)
 P2,000,000 x 5% x 50% = P50,000  (P5,000,000-2,000,000) = P3,000,000
 P50,000/ 65% x 35% = P26,923  P3M/ 65% x 35% = P1,615,385

(30) (34)
 P3,000,000 x 5% x 50% / 12 = P6,250  P1,000,000 / 65% = P1,538,462
 P6,250/ 65% x 35% = P3,365  P1,538,462 x 35% = P538,462
(31) (35)
 P5,000,000  P800,000 / 65% = P1,230,769
 P5M/ 65% x 35% = P2,692,308  P1,230,769 x 35% = P430,769
(36)
 (P1,000,000/5) / 65% =
P130,000  P130,000 x 35% =
P45,500

(51)
Taxable de minimis P20,000
Taxable 13th month pay (P122,000-90,000) 32,000
Taxable income P52,000
Income Tax Due (Tax Table, TRAIN Law) exempt

(52) Pedro is exempt as a minimum wage earner but his business income of P500,000 is taxable.

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