Sie sind auf Seite 1von 5

Accounting Review

TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA

1. DEFINITION OF CERTAIN TERMS


Fringe benefits Any good, service or other benefit furnished or granted 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 the items enumerated below.

2. IMPOSITION OF FRINGE BENEFIT TAX


A final tax Fringe benefit tax is a final tax.

Imposed on the grossed- Fringe benefit tax is imposed on the grossed-up monetary value of fringe benefits
up monetary value furnished granted or paid by employer to employees except rank and file employees.
Imposed regardless of Fringe benefit tax is imposed whether the employer is an individual, professional
who the employer partnership or corporation, regardless of whether the corporation is taxable or not, or
the government or its instrumentalities.
Withheld by employer Fringe benefit tax shall be treated as a final tax on the employee, which shall be
withheld and paid by the employer on a calendar quarterly basis.
Tax base and tax rate Monetary value of fringe benefit Pxxx
Divided by 68%
Grossed-up monetary value xxx
Tax rate 32%
Fringe benefit tax Pxxx
Tax base and tax rate for Monetary value of fringe benefit Pxxx
NRA-NETB Divided by 75%
Grossed-up monetary value xxx
Tax rate 25%
Fringe benefit tax Pxxx
Tax base and tax rate for Monetary value of fringe benefit Pxxx
special aliens and their Divided by 85%
Filipino counterparts Grossed-up monetary value xxx
and employees in Tax rate 15%
Special Economic Zone Fringe benefit tax Pxxx

3. EXAMPLES OF FRINGE BENEFITS


Fringe benefits subject to a. Housing;
final tax b. Expense account;
c. Vehicle of any kind;
d. Household personnel, such as maid, driver and others;
e. Interest on loan at less than market rate to the extent of the difference between
the market rate and actual rate granted (12% benchmark rate);
f. Membership fees, dues and other expenses borne by the employer for the
employee in social and athletic clubs and similar organizations;
g. Expenses for foreign travel;
h. Holiday and vacation expenses;
i. Educational assistance to the employee or his dependents;
j. Life or health insurance and other non-life insurance premiums or similar
amounts in excess of what the law allows.
Fringe benefits not a. Fringe benefits which are authorized and exempted from income tax under the
subject to fringe benefit Tax Code or under any special law;
tax b. Contributions of the employer for the benefit of the employee to retirement,
insurance and hospitalization benefit plans;
c. Benefits given to rank and file, whether granted under a collective bargaining
agreement or not;
d. De minimis benefits;
e. Benefits granted to employee which are required by the nature of, or necessary
to the trade, business or profession of the employer; or
f. Benefits granted for the convenience or advantage of the employer.
g. Housing privileges or units.
h. Use of aircraft and helicopters owned and maintained by the employer
i. Expenses

Page | 1
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA

j. Cost of education assistance provided

4. DE MINIMIS BENEFITS
Meaning of de minimis De minimis benefits are facilities or privileges furnished or offered by an employer
benefits to his employees that are of relatively small value and are offered or furnished by
the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employees.

Examples 1. Medical benefits given to the employees by the employer


2. Employee achievement awards (e.g. for length of service or safety achievement)
3. Gifts given during Christmas and major anniversary celebrations
4. Uniforms and clothing allowance given to employees by the employer
5. Rice subsidy granted by an employer to his employees
6. Laundry allowance
7. Medical cash allowance to dependents of employees
8. Daily meal allowance for overtime work
9. Monetized unused vacation leave credits
10. Flowers, fruits, books or similar items given to employees under special
circumstances (e.g. on account of illness, marriage, birth of a baby, etc.)
11. Monetized value of leave credits paid to government officials and employees
12. Company picnic and sports tournaments in the Philippines which are participated
exclusively by employees

5. TAX ACCOUNTING FOR THE FRINGE BENEFIT FURNISHED TO THE EMPLOYEE AND THE FRINGE
BENEFIT TAX DUE THEREON

a. Deductible fringe benefits and fringe benefits tax.


Basis of fringe benefits tax Amount deductible from employer’s gross income
1) General rule Taxable fringe benefits and the fringe benefit tax
2) Depreciation value Actual fringe benefit tax paid
3) Zonal value per BIR Commissioner Actual fringe benefit tax paid
4) FMV per current real property tax declaration Actual fringe benefit tax paid

6. COMPUTATION OF MONETARY VALUE


Basic rules a. In case of housing privilege and motor vehicle:
1) If there is no transfer of ownership, the monetary value of benefit is 50% of
the value of benefit.
2) If there is transfer of ownership, the monetary value of the benefit is the
same as the value of the benefit.
b. In case of other fringe benefits – The monetary value of the benefit is the
same as the value of the benefit.

7. MONETARY VALUE OF HOUSING PRIVILEGE


Value of the benefit Monetary value of the benefit

Employer leases residential property for the Rental paid 50% of the value of the
use of the employee benefits
Employer owns residential property which 5% of the FMV of the land 50% of the value of the
was assigned to an officer for his use as and improvements benefits
residence
Employer purchases residential property on 5% of the acquisition cost 50% of the value of the
the installment basis and allows the exclusive of interest benefits
employee to use the same as his residence
Employer purchases a residential property Employer’s acquisition cost or Entire value of the benefit
and transfers the ownership in the name of FMV, whichever is higher
the employee
Employer purchases a residential property FMV xxx Entire value of the benefit
and transfers ownership to his employee for

Page | 2
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA

the latter’s residential use at a price less Less: Payment by xxx


than the employer’s acquisition cost employee xxx
Value of benefit
Exercises

a) During the year 2006, ABC Corporation paid for the monthly rental of a residential house of its branch
manager, Mr. J. de la Cruz, amounting to P68,000. Prepare the necessary journal entries.

b) XYZ Corp. owns a condominium unit. During the year 2006, the said corporation furnished and granted
the said property for the residential use of its Assistant Vice President. The fair market value of the
property per BIR amounts to P10,000,000 while its fair market value as shown in its current Real Property
Declaration amounts to P8,000,000. Prepare the necessary journal entries.

c) Using the same data in illustration no. 2) above and assuming that the acquisition cost of the residential
property is P7,000,000 and the remaining useful life is 15 years. Prepare the necessary journal entries.

d) In 2007, Taprolani Corporation purchased a residential house and lot a P2,300,000. The property was
sold to the President of the corporation for P1,980,000. The fair market value per BIR and per Assessor’s
Office were P2,500,000 and P2,607,000 respectively.

e) A house and lot were owned by Bonafe Laundry Corporation. The ownership of the said house and lot
was transferred to its President, Mars Bonafe, in 2007. The following data were made available:
Cost P5,000,000
Fair market value per BIR 4,500,000
Fair market value per Assessor’s 3,000,000
Office

How much was the fringe benefits tax, if any?

8. MONETARY VALUE OF VEHICLES OF ANY KIND


Value of the benefit Monetary value of the benefit

Employer owns and maintains a fleet of Acquisition cost of all motor 50% of the value of the benefit
motor vehicles for the use of the business vehicles not normally used for
and employees business divided by 5 years

Employer leases and maintains a fleet of Amount of rental payments 50% of the value of the benefit
motor vehicles for the use of the business for motor vehicle not normally
and the employees used for business purposes

Employer purchases the motor vehicle in Acquisition cost Entire value of the benefit
the name of the employee
Employer provides the employee with cash Amount of cash received by Entire value of the benefit
for the purchase of a motor vehicle in the the employee
name of the employee
Employer shoulders a portion of the amount Amount shouldered by Entire value of the benefit
of the purchase price of a motor vehicle in the employer
the name of the employee
Employer purchases the car on installment Acquisition cost Entire value of the benefit
in the name of the employee exclusive of interest
divided by 5 years

Use of yacht, whether owned and Depreciation of a


maintained or leased by employer yacht at an estimated
useful life of 20 years

Exercises

1) In 2007, Mata Optical Shop, sole proprietorship, purchased a motor vehicle for the use of its Manager,
Dr. Malachi Mata. It was registered in Dr. Mata’s name. The cost of the vehicle was P400,000. The vehicle
was used partly for the benefit of the company. How much is the fringe benefits tax?

Page | 3
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA

2) Eyes Drop, maker of the best-selling ice cream, owns a fleet of motor vehicles for use of the business
and its employees. One of the motor vehicles costing P450,000 is not used for business purposes, but for
the employees’ personal need. How much is the annual fringe benefits tax?

9. OTHER FRINGE BENEFITS


Value of the benefit Monetary value of the benefit

a. Expense account Amount given or paid by Entire value of the benefit


b. Household personnel, such as maid, driver employer
and others
c. Interest on loan at less than market rate to the
extent of the difference between the market
rate and actual rate granted (12% benchmark
rate)
d. Membership fees, dues and other expenses
borne by the employer for the employee in
social and athletic clubs and similar
organizations
e. Expenses for foreign travel
f. Holiday and vacation expenses
g. Educational assistance to the employee or his
dependents
h. Life or health insurance and other non-life
insurance premiums or similar amounts in
excess of what the law allows.

Exercises
1) In 2004, Race Corporation paid the P50,000 vacation expenses of its President, Ms. Rita Ube to Dayag Rezzort.

Question 1 – How much is the value of the fringe benefit?


2– How much is the monetary value of the fringe benefit?
3– How much is the grossed up monetary value of the fringe benefit?

2) Kat Lee, an executive of the Race Bank, was granted a loan by the bank. The amount of the loan was
P2,000,000 at 8% interest per annum. The loan was payable in four (4) months. How much is the monthly fringe
benefit tax?

10. FRINGE BENEFITS THAT ARE NOT SUBJECT TO FRINGE BENEFITS TAX
Exercises

1) SB Corporation bought a residential property in installment for the use of its President. The total amount paid by
the corporation was P5,500,000 (inclusive of P500,000 interest).
Question 1 – How much was the value of the fringe benefit?
2 – How much was the monetary value of the fringe benefit?
3 – How much was the grossed-up monetary value of the fringe benefit?
4 – How much was the fringe benefits tax?

2) The books of accounts of Jones Company showed the following:


Fringe benefits expense P750,000
Fringe benefits tax expense 76,470

Question 1 – How much is the grossed-up monetary value of the fringe benefits given to managers and
supervisors?
2– How much is the monetary value of fringe benefits given to managers and supervisors?
3– How much is the value of the fringe benefits given to rank and file?
4– How much was the total amount of deductions?

3) The following data from the year 2009 of a resident rank and file employee who was four (4) qualified dependent
children are made available:
Salary, net of P10,000 withholding tax, P2,400 SSS contributions, P2,000 Philhealth P206,000
contributions and P1,500 union dues

Page | 4
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA

13th month pay 18,000


Rice subsidy (P1,500 x 12) 18,000
Uniform and clothing allowance 5,000
Monetized unused vacation leave credits (12 days) 6,000
Actual medical benefits 15,000
Christmas gift 10,000
Laundry allowance (P400 x 12) 4,800
Separation pay from a previous employer (terminated due to redundancy) 150,000
Interest income from a long term deposit which was pre-terminated (remaining maturity is 4 40,000
years) 10,000
Dividend from regional operating headquarters of a multinational corporation in the Philippines

Compute the following:


a) Tax-exempt de minimis benefits
b) Total exclusions/ exemptions (including de minimis benefits)
c) Total final withholding taxes
d) Taxable compensation income

---END---

Page | 5