Republic of the Philippines

BATANGAS STATE UNIVERSITY LIPA CITY

Lipa City

COLLEGE OF ACCOUNTANCY BUSINESS AND ECONOMICS

TAX 1-INCOME TAXATION

MODULE 6
FRINGE BENFIT TAXATION

NAME:_________________________________________________
COURSE/YEAR:_______________________________________
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FRINGE BENEFITS TAXATION

The only forms of employee income that were effectively taxed were those which were given in cash.
This was because an income tax was automatically withheld and collected at source by the government.
Additional compensation which was given in the forms of perks and other non-cash benefits were
virtually untaxed giving rise to inequity in the distribution of the tax burden. The Fringe Benefits
Tax(FBT) was proposed to enhance the progressivity of the income tax and to broaden the tax base.

Definition of a Fringe Benefit and Fringe Benefit Tax

The term “compensation” under Section 2.78.1 (A) of RR 2-98 means all remuneration for services
performed by an employee for his employer under an employer- employee relationship, unless
specifically excluded by the Code. The name by which the remuneration for service is designated is
immaterial. Thus , salaries, wages, emoluments and honoraria, allowances, commission (e.g
transportation, representation, entertainment and the like), fees including director’s fees, if the director’s
at the same time, an employee of the employer/corporation; taxable bonuses and fringe benefits except
those which are subject to the fringe benefits tax under Sec. 33 of the Code; taxable pensions and
retirement pay; and other income of a similar nature constitute compensation income.

On the other hand, a “fringe benefit” is any goods service or other benefits furnished or granted by
an employer in cash or in kind, in addition to basic salaries. In short, it is a form of pay which may be in
the form of property, services, cash or cash equivalent to supplement a stated pay for the performance of
services. Under the tax code, fringe benefits subject to fringe benefit tax cover only those fringe benefits
given or furnished to a managerial or supervisory employee. The regulations do not cover those benefits
which are part of taxable compensation income because such incomes are subject to withholding tax on
compensation in accordance with RR No2-98 as amended. The tax treatment of fringe benefits given to
employees is shown in Table 3-1 below:

Table 1: Tax Treatment of Fringe Benefits

Fringe Benefits Part of Basic Salaries or Subject to Basic Tax and Subject
given to: *Taxable Compensation CWT on compensation TO FBT
•Rank &File YES YES NO
•Supervisory/ NO NO YES
Managerial

Nature of a Fringe Benefits Tax

Fringe Benefits Tax(FBT) is a monetary burden imposed by the sovereignty on any good, service, or
other benefit furnished or granted by an employer, in cash or in kind, in additional to basic salaries, to
an individual employee, other than a rank and file employee.
The FBT is a final tax imposed on the employee withheld by the employer, computed at 35%
(beginning January 1, 2018 or upon the effectivity of TRAIN Law) on the gross up monetary value (GUMV)
of the fringe benefit granted by the employer to an employee who holds a managerial or meaning, at the
firm’s level rather than at the taxpayers level to facilitate tax administration.

Items of Fringe Benefits subject to Tax

Unless exempt, the following items of fringe benefits received by a supervisory or managerial
employee shall be subject to fringe benefit tax:
1) Housing
2) Expense account
3) Vehicle of any kind
4) Household personnel, such as maid, drive and others

Fringe Benefit Tax -LECTURES Page 1

 5) Interest of loan at less than market rate to the extend of the difference between the market rate
and actual rate granted
6) Membership fees, dues and other expenses borne by the employer for the employee in social and
athletic clubs and similar organizations
7) Expenses for foreign travel
8) Holiday and vacation expenses
9) Educational assistance to the employee or his dependents
10) Life or health insurance and other non-life insurance premium or similar amounts in excess of
what the law allows.

ILLUSTRATION 1: Covered Employees

Ana was hired by Earl to be the latter’s secretary and personal assistant. To enable her to perform her
duties well, Earl provided a condo unit (adjacent to his) unit which Ana could use as her temporary
residence. Is the fair market value of the use of the condo by Ana a “fringe benefits” that is subject to
fringe benefit tax imposed under section 33 of the National Internal Revenue Code?

►Answer: No.
Ana is neither a managerial nor a supervisory employee. Only fringe benefits granted to
managerial and supervisory employees are subject to the fringe benefits tax.
Tax Exempt Fringe Benefits
The following fringe benefits shall not be subject to basic tax or fringe benefit tax:
1) Fringe benefits which are authorized and exempted from income tax under any special law
such as :
• Contributions required under SSS law
• Contributions required under GSIS law
• Similar contributions under an existing law
• Premium for group insurance of employees
2) If the grant of fringe benefits to the employee is required by the nature of, or necessary to the
trade, business or profession of the employer.

ILLUSTRATION 2:
“Outstation Allowance (covers meals and trip-related expenses)” are granted to the managerial and
supervisory employees of Philippine Gaming Management Corporation (PGMC) who will be away from
the office site for at least 8 hours to visit lotto franchise holders for repairs and/or inspection of
equipment leased by PGMC from Philippines Charity Sweepstakes Office (PCSO). Should the
aforementioned allowance be subjected to tax?
►Answer: No.
The allowance is required by the nature of or necessary to the trade or business of PGMC,
hence , not subject to the fringe benefits tax prescribed in Section 33(A) of the Tax Code.
Consequently, it is not subject to Income Tax and to withholding tax . By the same token, the
aforestate allowance which may be incurred or expected to be incurred by the managerial and
supervisory employees in the performance of their duties cannot be considered as part of
compensation subject to withholding tax even if the employees fail to account/liquidate the
same considering that said expenses are pre- computed on a daily basis and are paid to employees
while on an assignment or duty (BIR Ruling No. 013-2002 dated April 5,2002).
3) De minimis benefits
4) If the grant of benefits is for the convenience or advantage of the employer.

ILLUSTRATION 3:
CASE A. Use the same data in illustration #1.
Question 1:
Is the fair market value of the use of the condo unit by Ana a “compensation income” that is subject to
basic tax under Section 24A of the Tax Code and consequently to creditable withholding tax on
compensation income?
►Answer: No.
The condo unit is provide for the convenience of the employer, hence does not constitute a taxable
fringe benefit. Being his personal secretary, it is necessary for Ana to be accessible to Earl anytime.
Question 2:
Assuming Ana is a managerial or supervisory employee, is the fair market value of the use of the condo
by Ana a “fringe benefit” subject to FTB?
►Answer: No.
As explained in question #1, if the grant of benefits is for the convenience or advantage of the
employer, irrespective of the employee’s rank , the benefit shall not be subject to fringe benefit tax and
basic tax on compensation income.

Fringe Benefit Tax -LECTURES Page 2

CASE B:
Arthur Henderson and Marie Henderson filed their annual income tax with the BIR, Arthur is president
of American International Underwriters for the Philippines, Inc., which is a domestic corporation
engaged in the business of general non-life insurance, and represents a group of American insurance
companies engaged in the business of general non-life insurance.
The BIR demanded payment for alleged deficiency taxes. In their computation, the BIR included as part
of taxable income:

•Arthur’s allowances for rental, residential expenses, subsistence, water, electricity and telephone
expenses
•Entrance fee to the Marikina Gun and Country Club which was paid by his employer for his account,
and
•Travelling allowance of his wife
The taxpayers justification are as follows:
•As to allowances for rental and utilities, Arthur did not receive money for the allowances. Instead, the
apartment is furnished and paid for by his employer-corporation (the mother company of American
International), for the employer corporation’s purposes. The spouses had no choice but to live in the
expensive apartment, since the company used it to entertain guest, to accommodate officials, and to
entertain customers.
•The entrance fee should not be considered income since it is an expense of his duties of increasing and
sustaining the business of his employer.
•His wife merely accompanied him to New York on a business trip as his secretary, and at the
employer-corporation’s request, for the wife to look at details of the plans of a building that his employer
intended to construct. Such must not be considered taxable income.

Ruling:
The Supreme Court ruled that the claims are not part of taxable income because no part of the
allowances in question redounded to their personal benefit, nor were such amounts retained by them.
The bills were paid directly by the employer-corporation to the creditors. The rental expenses and
subsistence allowances are to be considered not subject to income tax. The taxpayer’s high executive
position and social standing, demanded and compelled the couple to live in a more spacious and
expensive quarters. Such “subsistence allowance” was a separate account from the account for salaries
and wages of employees. The company did not charge rental as deductible from the salaries the
employees. These expenses are company expenses, not income by employees which are subject to tax
(Collector vs Henderson).

FBT Rates
The rate of fringe benefit tax vary depending on how the employees are taxed.

FRINGE BENEFIT TAX BASE AND RATE

Classification of taxpayers CIT.,RA.NRAET NRA NETB SAEs/SFEs**
Monetary value Pxx Pxx Pxx
Divide by gross monetary value factor 65% 75% 85%
Gross-up monetary value Pxx Pxx Pxx
x FBT Rate 35% 25% 15%
Fringe benefit tax Pxx Pxx Pxx

ILLUSTRATION 4:
Determine the grossed-up monetary value and the fringe benefit tax of the following (if applicable) for
2018 taxable year:
1) P39 grocery allowance for the personal consumption of an executive of ABC Corporation.
2) P40,800 expenses paid by an executive of ABC Corporation duly receipted for in the name of ABC
Corporation and is not in the nature of personal expense.
3) P40,800 expenses incurred by an executive of ABC Corporation in connection with attending
business meeting or convention.
4) P40,800 grocery allowance for the personal consumption of one of ABC Corporation’s rank and
file employees.
►Answers:
1) GUMV=P39k/65%=P60,000; FBT=P39k/65% x 35%=P21,000
2) GUMV=P40,800**; FBT=P0
**The expenditure is not in the nature of personal expense of the company’s executive, hence, it
is not a fringe benefit taxable to the employee. It is an ordinary business expenditure of ABC
Corporation.
3) GUMV=P40,800; FBT=P0; same explanation with #2
4) GUMV=P40,800 same with monetary value FBT=P0**; subject to basic tax

Fringe Benefit Tax -LECTURES Page 3

Valuation of Fringe benefits
• If granted in money, the value is the amount granted.
• If granted in property and ownership is transferred to the employee, the value is the fair market value
of the property.
• If granted in property but ownership is not transferred to the employee, the value is equal to the
depreciation value of the property.

Deductible expense of the employer

If the fringe benefit is given to a rank and file employee, or to a supervisory or managerial employee,
but is not subject to fringe benefit tax ,the deduction for the employer is the monetary value of the fringe
benefit. On the other hand, if the fringe benefit is given to a supervisory or managerial employee and is
subject to fringe benefit tax, the deduction is the grossed-up monetary value of the fringe benefit which
compose of the fringe benefit expense and the fringe benefit tax.

ILLUSTRATION 5:
Assume an employer furnished cash fringe benefit subject to fringe benefit tax amounting to P975,000

Question 1:
What should be the appropriate journal entry in the books of the employer?
►Answer:
Fringe benefit expense P975,000
(monetary value)
Fringe benefit tax expense 525,000
(P975,000/65%)x35%
Cash (GUMV)***(P975,000/65%) P1, 500,000
***The P1,500,000 grossed-up monetary value is composed of P975,000 paid to the employee and
P525,000 paid/remitted to the BIR.
Question 2:
Assume that the cash fringe benefit is not subject to fringe benefit tax, what should be the appropriate
journal entry of the employer?
►Answer:
Fringe benefit expense P975,000
(Compensation expense)
Cash P975,000
DE MINIMIS BENEFITS
The following shall be considered de minimis benefit not subject to income tax as well as withholding tax
on compensation income of both managerial and rank and file employees:
1) Monetized unused vacation leave credits of private employees not exceeding “10 days” during the
year.
Payment of monetized unused “vacation” leave credits exceeding 10 days as well as payment of “sick”
leave, regardless of number of days shall be added to “other benefits” with a P90,000 ceiling.
2) Monetary value of vacation and sick leave credits paid to government officials and employees.
Compared to employees in the private sector, payment of monetized unused “vacation and sick” leave
credits to government officials/employees regardless of the number of days shall be exempt from tax on
compensation income.
3) Medical cash allowance to depends of employees not exceeding P750 per semester or P125 a
month.
4) Rice subsidy of not more than P1,500 per month or 1 sack (50kg.) rice per month.
5) Uniforms given to employees by the employer not exceeding P5,000 per annum (as amended by
RR 8-2012)
6) Actual medical assistance given not exceeding P10,000 per annum such as medical allowance to
cover medical and health care needs, annual medical/executive check-up, maternity assistance and
routine consultations.
7) Laundry allowance not exceeding P300 per month.
8) Employees achievement awards
9) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000per
employee per annum. Daily meal allowance for overtime work and night/graveyard shift not exceeding
25% of the basic minimum wage on a per region basis provided such benefits is given on account of
overtime work or if given to employees on night/graveyard shift.
10) RR 1-2015 dated January 5,2015 includes as non-taxable “de minimis benefits” the following ;
benefits received by an employee by virtue of a collective bargaining agreement (CBA); and, Productivity
incentive schemes. Provided, that the total annual monetary value received from the two (2) items above
combined, do not exceed P10,000.00 per employee per taxable year.

Fringe Benefit Tax -LECTURES Page 4

Excess of de minimis benefits over their respective ceilings
The amount or de minimis benefits conforming to the ceiling of de minimis benefits shall not be
considered in determining the P90,000 ceiling of “other benefits” excluded from the gross income under
Section 32B(7)(e) of the Code as amended by RA10963-TRAIN Law (previously P82,000 under RA10653;
RR 3-2015). On the other hand, the excess of the de minimis benefits over their respective ceilings
prescribed under this regulation shall be considered as part of other benefits subject to tax only on the
excess over the P90,000 ceiling.
All other benefits given by employers which are not included in the enumeration of de minimis
benefits shall not be considered de minimis benefits but should fall under the classification of “other
benefits” and is therefore subject to the P90,000 ceiling. The excess of the benefits over the P90,000 limit
would form part of an individual’s gross income and would be subject to income tax and application
creditable withholding taxes.

P90,000 Ceiling for 13th month pay/bonuses and “Other Benefits”

Section 32(B)(7)(E) of the Tax Code in relation to PD 851 as amended by RA10653 provides that 13 th
month pay and other benefits received by officials and employees of public and private entities are
exempt from income tax and creditable withholding tax on compensation, provided however, that
beginning January 1, 2018, the total exclusion shall not exceed P90,000(RA 10963-TRAIN Law).
Otherwise, the excess would form part of an individual’s gross income and would be subject to income
tax and applicable creditable withholding taxes.
“Other Benefits” under these regulations include:
•Christmas bonus
•Productivity incentive bonus
•Loyalty awards
•Gifts in cash or in kind and other benefits of similar nature actually received by officials and
employees of both government and private offices.
Further, RR 3-2015 emphasized that this exclusion from gross income is not applicable to:
(1) Self-employed individuals; and
(2) Income generated from business

Fixed or Variable allowances

In general, fixed or variable allowances which are received by a public officer or employee or employee of
a private entity, in addition to the regular compensation, fixed for his position or office, is compensation
subject to income tax and consequently, creditable withholding tax on compensation income. Examples
of fixed or variable allowances are transportation allowance, representation allowance, communication
allowance, living away from home allowance , (LAFHA), and the like.
Reasonable amounts of reimbursements/advances for travelling and entertain expenses which are pre-
computed on a daily basis and are paid to an employee while he is on an assignment or duty need not be
subject to the requirement of substantiation and to withholding.

Business related expenses/ Allowances subject to liquidation

Any amount paid specifically, either as advances or reimbursement for traveling, representation and
other bona fide ordinary and necessary expenses incurred of his duties are not compensation subject to
withholding, if the following conditions are satisfied:
• It is for ordinary and necessary traveling and representation or entertainment expenses paid or
incurred by the employee in the pursuit of the trade, business are profession; and
• The employees is required to account/liquidate for the foregoing expenses in accordance with the
specific requirements of substantiation for each category of expenses pursuant to Sec. 34 of the tax code.

Representation and Transportation Allowance

Representation and transportation allowances (RATA) granted under Section 34 of the General Act
to certain official of employees of the government are considered reimbursement for the expenses
incurred in the performance one’s duties rather than as additional compensation. However the excess
RATA, if not returned to the employer constitutes taxable compensation income of the employee.
Under several rulings issued by the BIR,the foregoing rule shall likewise apply to reasonable
amounts of reimbursements or advances for travelling and representation or private employees which
are pre- computed on a daily basis and which are paid to any employee while on assignment or duty.
Such allowance should not be considered compensation subject to withholding tax. On the other hand,
transportation and representation allowances which are fix in amounts and are regularly received by the
employees as part of their monthly compensation are subject to basis tax.
Communication Allowance
Communication allowance granted to employees are not subject from fringe benefit tax and tax on
compensation on the basis that communication allowance is deemed required by the nature of the job of
the employees and deemed necessary to business and redounds to the convenience and benefit.

Fringe Benefit Tax -LECTURES Page 5

TABLE 3: SPECIAL RULES IN COMPUTING THE MONETARY VALUE OF HOUSING BENEFITS
• Employer lease a residential property for Monetary Value: Rental paid x 50%
the use of the employee
• Employer owns a residential property for Monetary Value: The higher between FMV in the
the use of the employee Real property declaration or Zonal value x 5% x
50%
•Employer purchases residential property Monetary Value: Acquisition cost, exclusive of
In installment for use of the employee interest x 5% x 50%***
• Employer purchases residential property Monetary Value of the Benefits: The higher
and transfers ownership to employee between the acquisition cost or Zonal value
as determined by the CIR.
• Employer purchases residential property Monetary Value: The higher between the FMV
and transfers ownership to employee on a in the real property declaration or Zonal as
Lesser amount. determined by the CIR less cost to the
employee.

TABLE 5: RULES IN COMPUTING THE MONETARY VALUE OF MOTOR VEHICLES

1) Employer owns and maintains a fleet of Monetary Value: Acquisition cost of vehicles not
motor vehicles for the use of the business normally used for business divided by 5 years x
and employees 50%
2) Employer leases/maintain a fleet of Monetary Value: Amount of rental payments not
motor vehicles for the use of the business normally used for business purpose x 50%
and the employees
3) Employer purchases vehicle in the name Monetary Value: Acquisition cost
of employee
4) Employer provides employee with cash for Monetary Value: Cash received
the purchase of the vehicle, and ownership
is placed in the name of the employee
5) Employer purchases the vehicle on Monetary Value: Acquisition cost exclusive of
installment and ownership is placed in the interest divided by 5 years
name of the employee
6) Employer shoulders a portion of the Monetary Value: Amount shouldered by employer
amount of the purchase price of vehicle
and ownership is placed in the name of
the employee.

ILLUATRATION 6: (SPECIAL RULES IN COMPUTING MONETARY VALUE)

CASE A:
In 2018, a domestic corporation paid for the monthly rental of a residential house of its branch manager,
Mr. Juan Dela Cruz, amounting to P156,000. (Assume there is no transfer of ownership)
Question 1: What is the monetary value of the benefit?
Question 2: What is the grossed-up monetary value of the benefit?
Question 3: How much is the fringe benefit tax?
Question 4: Total amount deductible by the employer from its gross income?
Question 5: What is the appropriate journal entry to record the provision of the benefit?

►Answer:
Question 1: P78,000
Question 2: P120,000
Question 3: P42,000
Question 4: P198,000
SOLUTION:
Rental payment P156,000
X 50%
Monetary value P78,000
Divided by 65%
GUMV P120,000
x Fringe benefits tax rate 35%
Monthly Fringe benefit tax expenses P42,000
Add: Rentals paid 156,000
Total Deductible Expense P198,000
Question 5: To record the transaction, the following journal entries should be made by the employer
for the month:
Fringe benefit expense P156,000
Fringe benefit tax expense 42,000
Cash (Rental payment) P156,000
F.B. Tax Payable 42,000

Fringe Benefit Tax -LECTURES Page 6

NOTE
 Although the monetary value of the benefit is 50% only of the rental payment, the total deductible
amount of the employer is the total of the actual rental payment and the applicable fringe benefit
tax. The entire amount (P198,000) is considered as total compensation expense incurred by the
employer. Therefore, the special rules in computing the monetary value of the benefit should be
taken into consideration only for purposes of computing the fringe benefit tax.

CASE B
A domestic corporation owns a condominium unit. In 2018, 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 assessment amounts to R 10000000 while its fair market value as shown in its
current Real Property Declaration amounts to P 8000000 Determine the following:
1. Monthly Monetary value of the benefit?
2. Monthly Grossed-up monetary value of the benefit?
3. Monthly Fringe benefit expense?
4. Total amount deductible by the employer for the month?
5. Journal entry to record the provision of the above benefit?
Answers:
1. P20,833
2. P32,051
3. P0
4. P11,218
5. 11,218
Solution
FMV per BIR assessment (Higher) P10,000,000
X 5%
Value of the benefit 500,000
X 50%
Annual Monetary value P250,000
Divide by 12 mos

Monthly monetary value P20,833

Divide by 65%
Grossed-up monetary value (annual) P32,051
X Fringe benefit tax rate 35%
Fringe benefit tax for the year 11,218
Deductible by the employer for the year P11,218

NOTE
Fringe benefit expense is P0
The “fringe benefit tax expense” in this case is already the amount deductible from the employer’s gross
income as fringe benefit expense. The employer, shall not further claim other deduction such as the
monetary value of the benefit because the cost for the use of the residential property has been or will be
recovered as deduction from its gross income under “Depreciation expense” (RR 3-98)
 To record the transaction, the following journal entries should be made:
Fringe benefit tax expense P11,218
Fringe benefit tax payable P11,218
Case C
Using the same data in case B and assuming that the acquisition cost of the property is P5,000,000 with
a remaining useful life of ten (10 years). How much s the monthly fringe benefit expense?
Answers: P41,667 computed as follows
FMV per BIR assessment (higher) P10,000,000
Less: cost (5,000,000)
Excess of FMV over cost 5,000,000
Divide by its remaining life 10 years
Fringe benefit expense (for the year) 500,000
Divide by 12 months
Monthly fringe benefit expense P41,667

Fringe Benefit Tax -LECTURES Page 7

NOTE
 Fringe benefit expense for the month is P41,667
If the zonal value or fair market value of the said properly is greater than its cost subject to depreciation,
the excess amount shall be used in computing additional depreciation expense allowed as a deduction in
computing additional depreciation expense allowed as a deduction from the employer’s gross income as
fringe benefit expense and shall be amortized throughout the remaining useful life (RR 3-98). The journal
entry for the month in this case as provided in the foregoing revenue regulation shall be:

Fringe benefit expense P41,667

Fringe benefit tax expense 11,218
Income constructively realized P41,667
Fringe benefit tax payable 11,218
Non-taxable Housing Benefits
The following housing benefits shall not be considered taxable fringe benefits (Sec 33-tax code):
1. Housing unit inside or adjacent (within 50 meters) from the perimeter of the business premises.
A housing unit which is situated “inside or adjacent” to the premises of a business shall not be
considered as a taxble fringe benefit. A housing unit is considered adjacent to the premises of the
business if it is located within the maximum of fifty (50) meters from the perimeter of the business. A
housing unit shall be considered to be for the “convenience or advantage of the employer” if the same is
within (50) meters from the perimeter of the business premises and employees are required to be on-call
due to the nature of the employers’ operation (BIR Ruling no. DA-635-04, December 15,2004 issued to
Foreign Holiday Philippines, Inc. and BIR Ruling NO. DA-241-04, May , 2004 issued to Sohbi Koghei
(Phils.), Inc.)
2. Temporary housing for a stay in the housing unit for three (3 months) or less.

3) Housing privilege of military officials of the Armed Forces of the Philippines.

Other Fringe Benefits
Under this category, the value of the benefit representing the amount given or paid by the employer
should also be the "monetary" value of the benefit.
1) Expense account
Expense account may be taxable as fringe benefits or treated as compensation income
depending on the nature of the expense account provided to employees.
a. Taxable as fringe benefits
Expense accounts paid for or reimbursed by employer (such as personal expenses like
groceries) are taxable fringe benefits. However, if the expenses were receipted in the name of
employer and do not partake the nature of "personal expenses attributable to employees, such
expense accounts should not taxable as fringe benefits. It should neither be included in
determination of the individual taxpayers' taxable compensation income.
b. Not treated as taxable fringe benefits
Representation and transportation allowance given regularly (Page 163) on a monthly basis are
not taxable fringe benefits but as compensation income subject to basic tax under Sec 24(A) of the
Tax Code.

2.) Expenses for foreign travel

Expenses in connection with attending business meeting or convention (inland travel expenses)
such as food, beverages and transportation during foreign travel (except lodging cost in a hotel) at an
average of $300 per day are.considered reasonable expenses and shall he subject to fringe benefit
tax The cost of economy and business class airplane ticket shall not be subject to fringe benefit tax.
However of the cost of first class airplane ticket shall be subject to fringe benefit tax in the absence
of documentary evidence showing that the employees travel abroad was in connection with business
meeting or convention, the entire cost of ticket, including cost of hotel accommodations and other
expenses shouldered by employer shall be treated as taxable fringe benefits.

Traveling expense of family members of employees paid for byemployer shall be treated as taxable fringe
benefit.
3.) Educational assistance to the employee or his dependents
In general, cost of educational assistance is treated as taxable fringe benefit except;
a. When the study is directly connected with the employer's trade business or profession
and there is a written contract between the employee and employer that the former is under
obligation to remain in the employ of the employer for a period of time

Fringe Benefit Tax -LECTURES Page 8

 b. When given to employee's dependents through a competitive scheme under scholarship
program of the company
4) Interest on loan at less than market rate to the extent of the difference a the market rate and
actual rate granted. The benchmark is 12% unit revised. The taxable fringe benefit is:
a. Interest foregone by the employer or
b. The difference of the interest assumed by me employ rate of 12%.
5) Membership dues or fees of employees borne by employer in social and athletic clubs or other
similar organizations
6) Life or health insurance and other non-life insurance premiums are treat as taxable benefits.
7) The following shall not be treated as taxable fringe benefits:
a. Fringe benefits which are authorized and exempted from income tax under the Tax Code
or under any special law (Page 155)
b. The fringe benefit is required by the nature of or necessary to the trade, business or
profession of the employer (Page 155)
c. When the fringe benefit is for the convenience or advantage of the employer (Page 166)
d. Contributions of the employer for the benefit of the employee to retirement, insurance
and hospitalization benefit plans.
e. Benefits given to rank and file employees.
f. Non-taxable housing benefits discussed in Page 170.
g. Other non-taxable benefits discussed in this chapter.
Use of Aircraft and Helicopters
The Use of aircraft and helicopters owned and maintained by the employer is not a taxable fringe
benefit but treated as business expense of the employer.

Filing of Returns
10th day of the month following the end of the calendar quarter in which the fringe benefits were
granted to the recipient.

Fringe Benefit Tax -LECTURES Page 9

 Republic of the Philippines
BATANGAS STATE UNIVERSITY LIPA CITY
Lipa City
COLLEGE OF ACCOUNTANCY BUSINESS AND ECONOMICS
TAX 1-INCOME TAXATION

MODULE 6
FRINGE BENFIT TAXATION

Determine the following incomes are subject to basic tax , fringe benefit tax or exempt from tax by
putting a check mark in the column provided below . If the value of the benefit is provided, indicate the
correct amount.

Subject to FBT Subject to Exempt

Amount
Basic Tax

1. Officer’s expense account not

subject to liquidation. 120,000

2. Officer’s expense account

subject to liquidation. 80,000

3. Personal expenses of the

company officers paid for or 50,000
reimbursed by the
company-employer.

4. Annual uniform allowances

granted to an executive. 5,000

5. Housing benefits of the

Philippine Army. 360,000

6. Housing benefits of officials of a

domestic corporation. 250,000

7. Housing unit furnished to an

employee, where said unit was 45,000
situated inside or adjacent to the
premises of the business

8. Monetized unused vacation

leave credits not exceeding 10 15,000
days

9. Household personal benefit

by an officer of a domestic 60,000
corporation.

10. Annual medical cash

allowance to dependents. 1,500

Fringe Benefit Tax -LECTURES Page 10

2. In 2018, Gracia Realty Corporation paid P325,000 to Wilderness Resort, representing vacation
expenses of Mike, and executive of Garcia Company. Answer the following.

a. Is this taxable fringe benefit?

b. How much is the tax base of the fringe benefit?
c. Should the taxable fringe benefit be included in the returnable income of Mike for the year?
d. How much is the fringe benefit tax collected?
e. When is the fringe benefit tax remitted?
f. Assuming Mike is a rank and file employee, is the fringe benefit subject to a fringe benefit tax?

3. LJ is a resident citizen employed by Chris Sports, Incorporated. He received the following from his
employer during 2018:
Basic Compensation Income 900,000
13th month pay 75,000
3,000 monthly transportation allowance 36,000
Productivity incentive pay 10,000
Christmas Bonus 25,000
Uniform allowance 15,000
Actual medical allowance 10,000
Rice subsidy 24,000
Required: Determine lJ’s net income

4. A rank and file employee received the following compensation and benefits received during 2018:
Basic Compensation Income 540,000
13th month pay 45,000
Mid-year bonus 22,500
Christmas gift 10,000
Uniform allowance 7,500
Actual medical allowance 15,000
Medical allowance to dependents 2,000
Rice subsidy 18,000
Monetized vacation leave for 12 days (2,000/day) 24,000

5. Special rules in computing the monetary value of fringe benefit

1. XYZ Co. leased a residential house for the use of its branch manager. The rent per agreement was
P165, 000 per month.
a. How much is the monetary value of the benefit per month?
b. How much is the fringe benefit per month?

2. XYZ Company owns residential property which is assigned to its officer for use. The following data
pertain to the residential property.
Cost P5, 000,000
Fair market value per BIR 4,500, 000
Fair market value per Assessor’s office 3,000,000
a. How much is the monetary benefit for the quarter?
b. How much is the fringe benefit tax for the quarter?

3. Using the same data in no. 2 , and assuming that XYZ Company transferred the ownership of
residential property in the name of the officer, answer the following:
a. How much is the monetary value of the benefit?
b. How much is the fringe benefit tax?

4. Chen Company purchased a motor vehicle for the use of its manager. The vehicle was registered in
manager’s name. The cost of the vehicle was P1, 200,000 used partly for the personal purposes and
partly for the benefit of the company. Compute the following.
a. Monetary value of the benefit.
b. Fringe benefit tax.

5. Using the same data in no. 4 and assuming that Chen shouldered only a portion of the cost of the car
in the amount of P800, 000 and the balance paid by the manager, determine the following .
a. Monetary value of the benefit.
b. Fringe benefit tax.

6. Using the same data in no. 4 and assuming that Chen purchased the car in the name of the manager
on instalment basis. Determine the following.
a. Monetary value of the benefit.
b. Fringe benefit tax.

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