FRINGE

BENEFITS
TAX
Definition Section 33 (B) of the NIRC
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 such as but not
limited to the following:

a. Housing
b. Expense account
c. Vehicle of any kind
d. Household personnel
e. Interest on loan
f. Membership fees, dues and other expenses
g. Expenses for foreign travel
h. Holiday and vacation expenses
i. Educational assistance
j. Life or health insurance and other non-life insurance
premiums
 Summary
INCOME DISTRIBUTION

Application Grossed-up Monetary

Value (fringe benefit
Payment to
Managerial Employee
(cash or monetary
income of the value of fringe benefit)
manager)
68%
100%

Remittance to the BIR

(final tax withheld)

32%
 General Rule 1: If fringe benefit is granted IN MONEY, or is
directly paid for by the employer

Rules
Value: amount granted or paid for

Rule 2: If fringe benefit is granted by the employer IN

in PROPERTY and OWNERSHIP IS
TRANSFERRED to the employee

Valuation Value: FMV of the property

Rule 3: If fringe benefit is granted IN PROPERTY but

OWNERSHIP IS NOT TRANSFERRED to the
employee
Value: depreciated value of the
property
 Housing
NON TAXABLE:
1. Housing Privilege of the AFT
2. Housing unit situated inside or
adjacent to the premises of a business
or factory (within the maximum of 50
meters away)
3. Temporary housing for three months
or less
Privilege FBT base
1. Lease of residential property 50% x rental payment
for residential use of
employees
2. Assignment of residential (5% of FMV or ZV wichever is
property for use of employees higher) x 50%
3. Purchase of residential (5% of acquisition cost) x 50%
property on installment basis
for the use of employees
4. Purchase of residential FMV or ZV whichever is higher
property and ownership is
transferred in the name of the
employees
 Motor
Vehicles
Note:
The use of aircraft shall be treated as
business use and is not subject to the
fringe benefit tax
The use of yacht shall be treated as
taxable fringe benefit; value shall be
based on the depreciation of a yacht at
an estimated useful life of 20 years
Privilege
1. Purchase of motor vehicle in
the name of the employee
2. Cash is given for the purchase
of vehicle; ownership - employee
3. Purchase of car on installment
basis; ownership - employee
4. Employer shoulders a portion
of the purchase price; ownership
- employee
5. Employer owns and maintains
vehicles for the use of business
and employees
6. Employer leases and
maintains vehicles for the use of
the business and employees
FBT base
Acquisition cost
Cash received
Note: If cash given is subject to WTW, it shall
not be subject to FBT anymore.
Acquisition cost/5
Note: AC exclusive of interest
Amount shouldered by the
employer
(Aquisition cost/5) x 50%
50% x rental payment
Expense 1. Expenses incurred by the employee but paid by his
employer

Account
2. Expenses paid by the employee but reimbursed by
his employer; if the expenditures are duly receipted
for and in the name of the employer and do not
partake the nature of personal expenses attributable
to the employee, the same shall not be subject to
FBT
3. Personal expenses of the employee paid for or
reimbursed by the employer whether or not the same
are duly receipted for in the name of the employer
Household Expenses of the employees which are borne by the
employer for household personnel shall be treated as

Expenses
taxable fringe benefits

examples: household help

personal driver
homeowners association dues
garbage dues
Interest i. If the employer lends money to his employee free of
interest or at a rate lower than 12% per year, such

on Loan
interest foregone by the employer of the difference
of the interest assumed by the employee and the
12% rate shall be treated as taxable fringe benefit
At less than ii. Benchmark interest rate of 12% shall remain in effect
Market Rate until revised by a subsequent regulation
iii. This regulation shall apply to installment payments
or loans with interest rate lower than 12% starting
January 1, 1998
Membership Expenses borne by the employer for the employee in
social and athletic clubs or other similar organizations

fees, dues The entire expenditure shall be treated as taxable fringe

benefits of the employee
and other
expenses
 Expenses General rule:
Reasonable business expenses for the foreign

for Foreign
travel for the purpose of attending business meetings or
conventions shall not be treated as taxable fringe benefits

Travel Exceptions:
1. Lodging cost incurred in excess of an average of $300
per day
2. 30% of the cost of the first class airplane ticket

Note: Expenses should be supported by documents. In

the absence of documentary evidence, the entire
cost incident thereto shouldered by the
employer shall be treated as taxable fringe
benefits.
 Holiday Entire amount shall be treated as taxable fringe benefit

and
Vacation
Expenses
Educational
General Rule Exception
1. Cost of educational assistance Scholarship grant to the

Assistance
to the employee which are borne employee by the employer
by the employer provided the ff. conditions are
met:
- Education is directly
connected with employers
trade, business or profession
- There is a written contract
that the employee is under
obligation to remain in the
employ of the employer for
the period mutually agreed
upon

2. Cost of educational assistance Assistance was provided through

extended by an employer to the a competitive scheme under the
dependents of an employee scholarship program of the
company
Insurance General Rule:
The cost of life or health insurance and other

Benefits
non-life insurance premiums borne by the employer for
his employee shall be treated as taxable fringe benefit

Exceptions:
1. Contributions pursuant to the provisions of existing
law such as under the SSS or GSIS or similar
contributions arising from the provisions of any other
existing law
2. Cost of premiums for the group insurance of the
employers employees
 FBT on
Recipient Tax Rate Tax Base
1. Nonresidential alien individual (NETB) 25% 75%

Special Tax 2. Alien individual employed by regional or

area headquarters of a multi-national
company
15% 85%

Payers 3. Alien individual employed by an

offshore banking unit of a foreign bank
established in PH
4. Alien individual employed by a foreign 15%
service contractor engaged in petroleum
operations in PH
5. Any of their Filipino individual 15%
employees who are employed and
occupying the same position as those
occupied or head by the alien employees
6. Employees in special economic zones, Subject to 85% or 75%
including Clark Special Economic Zone normal rate or
and Subic Special Economic and Free 25% or 15%
Trade Zone
 Fringe 1. Fringe benefits which are authorized and exempted
from income tax under the Code or under any special

Benefits not
law
2. Contributions for retirement, insurance, and
hospitalization benefit plans
subject to 3.
4.
Benefits given to rank-and-file
If the grant of fringe benefits is required by the

FBT nature of, or necessary to the trade, business or

profession of the employer
5. If the grant of fringe benefit is for the convenience of
the employer
6. De minimis benefits