Compensation and Fringe Benefit Flashcards
FOUR-FOLD TEST
1. Selection and Engagement
2. Payment of Wages
3. Power of Dismissal
4. Power of Control - not only end (also means)
Yes
Kaya mahalaga malaman to because
- if employee = income tax lang
- if professional rendering services = income tax + business tax
Exempt Compensation
- necessity of the employer rule
- convenience of the employer rule
- benefits requiring liquidation / substantiation
Yes
We have 3 types of benefits
- 13th month + Other Benefits
- De Minimis
- Fringe Benefits
Yes
Sa de minimis, per item is merong threshold. If the amount is within the threshold, it is exempt. What if the amount is over the threshold?
The excess will be part of 13 month + other benefits
The excess de minimis is to be added to iba pang 13 month + other benefits. Ang threshold is 90K. If the amount is withhin the threshold, it is exempt. What if the amount is over the threshold?
the excess is subject to RIT
(e.g. 100K = 90K exempt, 10K RIT)
Fringe benefits for employees are subject to fringe benefits tax. True or False?
Depends
- if given to Rank and File → RIT
- if given to Managerial and Supervisory → FBT
De Minimis Benefits
What is the limit to be exempt
- Vacation leave (private employee)
- Sick leave (private employee)
- Vacation leave (government employee)
- Sick leave (government employee)
- Vacation Leave (Private) → 10 days
- Sick Leave (Private) → taxable
- Vacation Leave (Gov’t) → no limit (all exempt)
- Sick Leave (Gov’t) → no limit (all exempt)
refer to table in notes
De Minimis Benefits
What is the limit to be exempt
- employee achievement award
- actual medical assistance
- benefits under CBA (productivity scheme)
General Rule
- 10,000 (in form of tangible property)
- 10,000
- 10,000
NOTE : For CBA, if 12,000 → entire amount (part of 13th M + OB)
De Minimis Benefits
What is the limit to be exempt
- major anniversary and christmas gift
5,000
5 years kadalasan interval pag mga anniversary
De Minimis Benefits
What is the limit to be exempt
- medical cash allowance to dependents
3,000
tatlong dependents (Wife, Child, Parent)
De Minimis Benefits
What is the limit to be exempt
- laundry allowance
3,600
360 days ka nagsusuot damit
De Minimis Benefits
What is the limit to be exempt
- uniform and clothing allowance
6,000
6 days in a week ka nagsusuot uniform
De Minimis Benefits
What is the limit to be exempt
- rice subsidy
24,000
50 kg of rice per month
De Minimis Benefits
What is the limit to be exempt
- daily meal allowance for OT and nightshift
25% of minimum wage
Who has the obligation to withhold on compensation?
employer
Annualized Withholding → last month of employment or December of current year
Requirements for Substituted Filing
- only 1 employer. True or False?
- mixed earner. True or False?
- correct withholding. True or False?
- True
- False = must be purely compensation earner (since substituted filing)
- True
Fringe Benefits Tax
- final tax
- quarterly tax (!!!)
Yes
Fringe Benefits Tax (HxH FEEL HIM V)
- Housing
- Household Personnel
- Foreign Travel
- Expense Account
- Educational Assistance
- Life and other Insurance
- Holiday Vacation Expenses
- Interest on Loan (12%)
- Membership Fees
- Vehicle
Fringe Benefits Tax
For housing to be exempt,
- AFP. True or False?
- within 75 meters. True or False?
- temporary (6 months). True or False?
- true
- false (within 50 meters)
- false (3 months)
Fringe Benefits Tax
For foreign travel to be exempt,
- for business convention (with evidence). True or False?
- lodging cost in hotel (max of $500 per day). True or False?
- economy and business class tickets (80% only). True or False?
- first-class ticket (80% only). True or False?
- true
- false (max of $300 per day yung exempt)
- false (if economy and business class → no limits)
- false (70% only yung exempt)
Fringe Benefits Tax
For expense account to be exempt,
- duly receipted
- in name of employer
- not personal expenses
Yes
Fringe Benefits Tax
For educational assistance to be exempt,
if given to employee
- directly connected with business
- bonded (written)
If given to dependents of employee
- if under a competitive scheme → dapat through grades yung scholarship para maging exempt sa FBT
Yes
Fringe Benefits Tax
For life and other insurance to be exempt,
- mandatory (SSS, GSIS)
- group insurance of employees → if individual, hindi exempt sa FBT
Yes
Fringe Benefits Tax
For vehicle to be exempt,
- aircraft and helicopters → business expense
following the necessity of the employer rule
COMPUTATION FOR FRINGE BENEFITS TAX
- what are the 4 steps?
Step 1→ value of benefit (cash paid, expense shouldered, depreciation)
Step 2 → monetary value (multiply by 50% or 100%)
Step 3 → grossed-up monetary value (divide by 65% or 75%)
Step 4 → fringe benefit tax (multiple by 35% or 25%)
In computing, always think of the word “BENEFIT”
Step 2 → monetary value (multiply by 50% or 100%)
Others = always 100%
Housing and Vehicle = dito lang medyo may special rule
- with transfer of ownership = 100%
- w/o transfer of ownership = 50%
Yes
Housing Benefits
What is the value, What is the monetary value
- if employer leases, with transfer of use
value = rental paid (since lease)
monetary value = x 50% (since use only)
Housing Benefits
What is the value, What is the monetary value
- if employer owns, with transfer of use
value = ↑ FMV or ZV
monetary value = x 50% / 20 years
- 50% since use only
- 20 years since owned
Housing Benefits
What is the value, What is the monetary value
- if employer purchase on installment, with transfer of use
value = acquisition cost (exclusive of interest)
monetary value = x 50% / 20 years
- 50% since use only
- 20 years since purchase on installment (which is parang owned na rin)
Housing Benefits
What is the value, What is the monetary value
- if employer purchase, with transfer of ownership
value = ↑ acquisition cost or ZV
monetary value = x 100% (since transfership na)
Housing Benefits
What is the value, What is the monetary value
- if employer purchase, with transfer of ownership for lesser amount
value = ↑ FMV or ZV less payment (think of the word “benefit”)
monetary value = x 100% (since transfership na)
Motor Vehicle
What is the value, What is the monetary value
- if employer lease and maintain, with transfer of use
value = rental paid (of those not used in business)
monetary value = x 50% (since use only)
Motor Vehicle
What is the value, What is the monetary value
- if employer own and maintain, with transfer of use
value = acquisition cost (of those not used in business)
monetary value = x 50% / 5 years
- 50% since use only
- 5 years since owned
Motor Vehicle
What is the value, What is the monetary value
- if yatch, with transfer of use
value = value
monetary value = x 50% / 20 years
- 50% since use only
- 20 years since real property then assumed owned
Motor Vehicle
What is the value, What is the monetary value
- if employer purchase on installment, with transfer of ownership
value = acquisition cost (exclusive of interest)
monetary value = x 100% / 5 years
- 100% since transfer of ownership
- 5 years since purchase on installment (which is parang owned na rin)
Motor Vehicle
What is the value, What is the monetary value
- if employer purchase, with transfer of ownership
value = acquisition cost
monetary value = x 100% (since ownership na)
Motor Vehicle
What is the value, What is the monetary value
- if employer give cash to employee, with transfer of ownership
value = amount of cash
monetary value = x 100% (since ownership na)
Journal Entry for Fringe Benefits
Dr. FB expense
Dr. FB tax expense
Cr. Cash or Tax basis of property
Cr. FB tax payable
At what amount should the FB expense be?
- Value, Monetary Value, or Grossed-Up MV?
Monetary Value
