Recently, though I’m not sure very recent, but
the legal rate is reduced to 6%. But, under the
So, this is just an explanation on the term “group
insurance”.
Again, when you get that group insurance, the
beneficiary is the employee in general, not a
specifically named employee.
How about for other benefits?
Say for example, Household Expenses, which is
being shouldered by the employer. Of course,
the monetary value which will be subject to FBT
there, would be 100%, of the Household
Expenses.
This includes the salary of the driver or the salary
of the yaya which is being paid by the employer.
But of course, the driver or the yaya must not be
under the payroll of the employer.
They must on the payroll of the employee and
the employer either reimburse their salary or
pays their salary directly. In such case, 100% may
be subject to Fringe Benefits Tax.
Interest on Loan at less than market rate, when
we talk of market rate, by the way, we are
looking at 12% legal interest.
regulation, the regulation specifically mentions
12%. So, when I checked the regulation, there is
no amendatory regulation which uses 6%.
So, apparently, in determining the difference on
the interest of the loan granted to the manager
or supervisor, versus the market rate, we still use
12%.
Two scenarios there, it’s either the employer
grants a loan to the manager or supervisor at no
interest since such case, 12% of the principal will
be considered as the monetary value of the
Fringe Benefit, divided by 65%, times 35%, that’s
your Fringe Benefits Tax.
The second scenario is the interest being
collected by the employer is made lower than 12
percent. So, in such case, the difference between
the interest collected by the employer and 12%
times the principal will be considered as the
monetary value of Fringe Benefit.
To get the Fringe Benefits Tax, that monetary
value will be divided by 65%. We actually
experience this in one of the clients before, they
are granting loans to their employees and it’s a
recurrent finding in our tax compliance review.
Of the employer wants to retain the employees,
that’s really understandable, but we always have
to remind, that you know, if you always grant
loans to your employees and this will be checked
by the BIR later on, there is always the Fringe
Benefits Tax exposure.
The good thing though is, this situation may not
necessarily fall within the radar of the BIR,
because often times the loan are short term,
meaning it’s being paid in a month, or even less
than a month.
So, by the year end, there is really no loans
receivable coming from the employees. There
will be no record because it will be zero out.
That’s what they are doing.
More so, they are not reporting any interest
income, because again there’s no interest to
speak of. It can’t easily be find out, but really, if
the BIR looks at the entire operation of the
company, that could be considered as loan
exposure.
That practice of granting employees loan with no
interest or below the market rate, that’s actually
a good practice. As an employee, I will appreciate
that.
But, as a tax compliance officer, it brings an
exposure.
What’s the best way to manage the exposure?
Create a COOP of your employees. That’s what
being used in big companies.
So their employees would create a credit
cooperative, they contribute to that credit
cooperative and if they want to get a loan, they
don’t loan from the company, they loan to their
credit cooperative.
But there is one key officer of the company,
which, of course, who runs the credit
cooperative. So that’s something that can be
taken into consideration.
Another Fringe Benefit, you have: membership
fees/dues in social and athletic clubs, 100%
thereof may be subject to Fringe Benefits Tax.
Take note that in this case, for it to be subject to
Fringe Benefits Tax, the membership in the social
and athletic club, should be in the name of the
manager or the supervisor. Not in the name of
the corporation or of the employer because, let’s
say for example, City Sports Club, the corporate
member is the company. But the company,
corporate as it is, it has to assign its share to an
assignee, to a natural person who can benefit
and who can use the facilities.
Usually, it’s the president or the vice president.
In that case, will there be a Fringe Benefits Tax
exposure?
Not necessarily. Why?
Because they are just mere assignees. They are
not the listed owners, or listed member of the
club or athletic club or social club.
But it would be a different story if the
corporation will pay the membership dues or
fees in the name of their president and claim it
as expense in their books or for taxation
purposes.
So, it opens exposure on Fringe Benefits Tax
imposition. And 100% of the value of
membership fees or dues will be subject to
Fringe Benefits Tax.
Then of course, your holiday and vacation
expenses.
Unlike the foreign travel wherein you can
present proof that is related to business. If it’s
holiday and vacation expenses, all expense paid
trips by the employer for the benefit of a
supervisor manager, 100% thereof may be
subject to Fringe Benefits Tax.
Why are there corporations going to Disneyland,
or they go abroad?
In those cases, of course, they don’t claim it as
holiday or vacation expense, they claim it as a
necessary business expense.
Because either they record it a strategic planning
expenses, which has something to do with the
operation of the business.
So, they go on strategic planning, or they go on
development activity, employee development
activity which has something to do with the
business of the company. So, they claim that as
an expense to avoid exposure from Fringe
Benefits Tax.
If you notice, some companies they go to
Disneyland but that’s just the side trip. Majority
of days or hours are spent for training.

I’m looking at a compliant company.

Spent for training, or spent for meetings, or

spent for planning.

This should be the status of the employee. It

must be present. It must be indicated that the
employee is a supervisor, a manager, the
president, etc., for you so say that FBT, or Fringe
Benefits Tax is applicable.

If it is an essay question, you are asked about

how much is the Fringe Benefits Tax, and there is
Just a quick illustration in how we compute the
no statement as to what type of employee, or
Fringe Benefits Tax.
what’s the rank of the employee receiving the
For example, you have ABC corporation. In this benefit, essay question, you should always start
case, ABC corporation paid for the monthly with the rank of the employee.
rental. So, this is rentals, meaning to say there is
If there is no statement, you can start with:
no transfer of ownership.
“Granting that employee D is a manager or
This alone will give you the idea that only 50% of
supervisor, then this is the Fringe Benefits Tax,
the monetary value will be subject to Fringe
blablabla.”
Benefits Tax.
Why?

Because there is another perspective to it.

What if he is a rank-and-file employee?

So, if it’s a rank-and-file employee, your answer

to that question: “How much is the Fringe
Benefits Tax?” will be zero.

Because if it’s a rank-and-file employee who is

Of a residential house of its branch manager. receiving that benefit, the benefit will just form
part of their regular compensation which is
subject to the regular tax on compensation.

But in this case, that’s not of a problem because

it’s expressly indicated: manager employee D.

The amount of the rent it Php 65,000.00. How

much is the quarterly?
The filing is quarterly, that’s why you are asked, The monetary value actually is Php 97,500.00,
quarterly fringe benefits tax due on the housing plus the Php 52,500.00 that we have computed,
privilege. that will actually give us a total of Php 150,000.00
which is equivalent to the grossed up monetary
At this point, you should understand how many
value.
months in one quarter. Why?
So that Php 150,000.00, this will be claimed as
Because here, the Php 65,000.00 given is
Fringe Benefits Expense, Total Expense, in the
monthly rental. So, if this is monthly rental, but
books of ABC corporation.
we are looking at quarterly fringe benefits tax.
The Php 65,000.00 convert into quarter, multiply Php 97,500.00 – Fringe Benefits Expense
that first by 3 months.
Php 52,500.00 – Fringe Benefits Tax Expense
There are 3 months in one quarter, there are 4
Php 150,000.00 – Total Expense
quarters in a year.

65,000 x 3 = 195,000

As what I’ve discussed, either you directly times

50%, or as what I did here, 195k because that is
the monetary value, this is the 65%, so for us to
compute the tax due, we have to divide 195k by
65% in order to get the grossed-up monetary
value.

Since there is no transfer of ownership, then we

multiply that by 50%.
So we get, 150,000 for the grossed up monetary
value.
Once you have the grossed up monetary value,
simply multiply that by 35%.
150,000 x 0.35 = 52,500
So, this is the amount that you will declare as a
Fringe Benefit Tax due, and in quarterly Fringe
Benefits Tax return.
Who pays for the Php 52,500.00?
It’s not employee D, instead it’s ABC corporation.
In so far as ABC corporation in this case, how
much is the expense that it will declare?
When should you file the Fringe Benefits Tax
returns?
Don’t be confused.
Sir, when I am receiving a salary, a
compensation, I am allowed to be substituted, so
I am required to file an Income Tax Return for my
compensation, subject to compensation income
tax 0-35%?
No, if you are qualified for substituted.
But, that’s a different story if you have a Fringe
Benefits Tax return. In Fringe Benefits Tax
Return, the final tax would have to be withheld
by the employer. And the filing of the return is
different from the usual return of compensation,
or the tax on your compensation.

The expense that it will declare in total actually So, in this case, the BIR forms are different.
would be Php 150,000.00.
BIR Form 1603, whereas if you are a
compensation income earner, you will have
there 1700.

So, in this case, BIR Form 1603 for the Fringe

Benefits Tax will be remitted to the BIR, 10 days
after the end of each quarter for Non-EFPS tax
payers.

For EFPS tax payers, it will be 15 days after the

end of each quarter.

So that’s the deadline.

This is for FYI purposes only. This is the

appearance of your quarterly tax return of Final
Income Taxes Withheld.

For your Fringe Benefits Tax, so you have 1603Q.

Of course, you have the tax payer information
there.