Chapter 11: FRINGE BENEFIT TAX
Fringe Benefits
- Pertains to all other benefits or
incentives of employees other than the
basic pay
- Under the NIRC, it pertains to goods,
services, or other benefits furnished by
the employer to the employee
GENERAL CATEGORIES OF FRINGE BENEFITS
SUBJECT TO FINAL TAX
1. Management perquisite benefits
2. Employee personal expenses
shouldered by the employer
3. Taxable de minimis benefit
a. Excess de minimis over their limit
b. Benefits not included in the de
minimis list
(one) Management Perquisite Benefits
- Also called as “management perks” are
highly privileged incentives given only
to a special group of employees
- Non-performance based
- Not considered as compensation but as
fringe benefits subject to fringe benefit
tax
(two) Employee Personal Expenses
- When an expense takes the nature of
an employee personal expense or
expenditure and is paid or assumed by
the employer in default of a proximate
business necessity, it is deemed fringe
benefit in its entirety even if the
expense is receipted in the name of the
employer
Hybrid Expenses
- When the employer incurs expenses
which is purported partly for business
and partly for employee’s incentive,
only 50% of the expense representing
the employee incentive is subject to the
fringe benefit tax
EXEMPT FRINGE BENEFIT
1. Authorized and exempted from tax
under special laws
2. Benefits required by the nature of, or
necessary to the trade, business or
profession of the employer
3. Benefit given for the convenience or
advantage of the employer
4. Contributions of the employer for the
benefit of the employee to retirement,
insurance and hospitalization benefit
plans
5. Benefits given to rank and file
employees whether or not granted
under a collective bargaining agreement
6. De minimis benefits within their legal
limits
FRINGE BENEFIT TAX
- Is a final tax imposed on the fringe
benefit furnished, granted or paid by
the employer to the employee
1. Housing Benefits
2. Expense account
3. Vehicles of any kind
4. Household personnel such as maid,
driver and others
5. Interest for the difference between the
market rate (12%) and the actual
interest 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. Expense for foreign travel
8. Holiday and vacation expense
 9. Educational assistance to the employee
or his dependent
10. Life or health and other non-life
insurance premiums or similar accounts
in excess of what the law allows

CHARACTERISTICS OF THE FRINGE BENEFIT TAX

1. Final tax
- Withheld by the employer at source
- The employee need not report the
fringe benefits in his income tax return
2. Tax upon the fringe benefits of
managerial and supervisory employees
- It is a tax upon the fringe benefit
realized by the managerial or
supervisory employee
- It is a tax to the employee and not to
the employer
3. Paid by the employer
- The tax is presumed withheld at source
and remitted by the employer to the
government
4. Grossed-up tax
- The monetary value or the amount of
fringe benefit realized or taken home by
the employee is effectively net of the
final tax
- The monetary value is first grossed-up
by the complement percentage of the
applicable fringe benefit tax rate before
the fringe benefit tax rate is applied
5. Due quarterly
- Reported quarterly through BIR Form
1603Q