Fringe Benefit Tax

Question 1

What kind of Tax is Fringe Benefit Tax?

Answer 1

A Final Withholding Tax

Therefore the Tax is already deducted before the Employee Received it

Question 2

What is Fringe Benefit?

Answer 2

Benefit Received other than the Compensation given by the Employer

Any Goods, Serviceor Other Benefit furnishe or Granted by the Employer

Question 3

What subject to which tax is Fringe Benefit Received by Rank and File employees (if it is Taxable)?

Answer 3

Basic Tax

Regular Income Tax

Question 4

What subject to which tax is Fringe Benefit Received by Managerial and Supervisor employees (if it is Taxable)?

Answer 4

Fringe Benefit Tax

Question 5

Fringe Benefit is Paid by which Employer

Answer 5

Individual, Professional Partnership, Corporation

Question 6

Fringe Benefits can be Taxable or Not?

True or False

Answer 6

True

If the Fringe Benefit is Non-Taxable it is Exempt

Question 7

It is the actual value received by the employee after Deducting the Fringe Benefit Tax

Answer 7

Monetary Value (net of Tax)

Question 8

It is the should be value received by the employee before Deducting the Fringe Benefit Tax

Answer 8

Gross-Up Monetary Value

Question 9

What Fringe Benefit Tax Rate for All Individuals other than the NRA-NETB?

Answer 9

35%

Question 10

What Fringe Benefit Tax Rate for NRA-NETB?

Answer 10

25%

Question 11

How to Compute the Gross-Up Monetary Value?

Answer 11

Monetary Value / (100% - 35% or 25%) Depending on which Individual

or Monetary Value / 65% (RC to NRA-ETB) or 75% (NRA-NETB)

Question 12

How to Compute the Fringe Benefit Tax?

Answer 12

Gross-Up Monetary Value * 35% or 25% Depending on which Individual

Question 13

Example of Fringe benefits which are authorized and exempted from income tax under any special law?

Answer 13

• Contributions required under SSS law
• Contributions required under:GSIS law
• Similar contributions under an existing law
• Premiums for group insurance of employees

Question 14

“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 ‘Philippine Charity Sweepstakes Office (PCSO). Should the aforementioned allowance be subjected to tax?

Answer 14

No

As 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 the Fringe Benefit is not Subject to Fringe Benefit Tax Consequently, it is not subject to Income Tax and to withholding tax

Question 15

De Minimis Benefits is Subject to Fringe Benefit Tax.

True or False

Answer 15

False

if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as means of promoting the health, goodwill, contentment or efficiency of his employees. These benefits are exempt from withholding tax on compensation and fringe benefits tax(FBT), regardless of the position of the employee who received such benefit(s).

Question 16

Illustration

Ana was hired by Earl to be the latter’s secretary and personal assistant. To enable her fo perform her duties well, Earl provided a condo unit (adjacent to
the office) which Ana could use as her temporary residence. Is the fair market value of the use of the condo unit by Ana a “compensationincome” that is subject to basic tax under Section 24A of the Tax Code and consequently to creditable withholding tax on compensation income?

Answer 16

No

As if the grant of benefits is for the convenience or advantage of the employer it is not subject to Fringe Benefit Tax even assuming that Ana is Managerial or Supervisor Employee

Question 17

What is the Valuation of fringe benefits, If granted in money?

Answer 17

Amount Granted

Question 18

What is the Valuation of fringe benefits, if in property and ownership is transferred to the employee?

Answer 18

Fair Value of the Property

Question 19

What is the Valuation of fringe benefits, if in property but ownership is not transferred to the employee?

Answer 19

Depreciation Value of the Property

Question 20

Illustration

Assume an employer furnished cash fringe benefit subject to fringe benefit tax amounting to P975,000, What should be the appropriate journal entry in the books of the employer?

Answer 20

Debit: Fringe benefit expense : P975,000
‘(monetary value) .
Debit: Fringe benefit tax expense 525,000
(P975,000/65%) x 35%

Credit: Cash (GUMV) (P975,000/65%) P1,500,000

Question 21

Assume an employer furnished cash fringe benefit subject to fringe benefit tax amounting to P975,000, Assume that the cash fringe benefit is not subject to fringe benefit tax, what should be the appropriate journal entry of the employer?

Answer 21

Debit: Fringe benefit expense : P975,000
Compensation Expense

Credit: Cash : P975,000

Question 22

De Minimis is subject to Income Tax

Answer 22

False

Facilities and Privileges such as entertainment, medical services, or so called “courtesy” discounts on purchases, otherwise known as “De Minimis Benefits,” furnished or offered by an employer to his employees, are not considered as compensation subject to income tax and consequently to withholding tax,

Question 23

Monetized unused vacation leave credits of private employees is considered de minimis benefits not subject to income tax as well as withholding tax on compensation income of both managerial and rank and file employees not exceeding how many days during the Year?

Answer 23

10 Days

Payment of monetized unused “vacation” leave credits exceeding 10 days as well as payment of “sick” leave, rgardless of number of days shall be added to “other benefits” with a P90,000 ceiling. Any amount exceeding the P0,000 ceiling shall be subject to basic and creditable withholding tax on compensation income. 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.

Question 24

Medical cash allowance to dependents of employees not exceeding ____ or ____ is consider De Minimis Benefits

Fill in the Blanks

Answer 24

P1,500 per semester; P250 a month

Question 25

Rice subsidy of not more than ____ per month or ____ rice
per month is Consider De Minimis

Fill in the Blanks

Answer 25

P2, 000 or 1 sack (50kg.)

Question 26

Uniform Given by the Employer to the Employee amouting ____ is Considered De Minimis therefore not subject to any tax

Fill in the Blanks

Answer 26

P6,000 or Less

Question 27

Actual medical assistance given ____ per annum such as medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance and routine consultations.

Fill in the Blanks

Answer 27

not exceeding P10,000

Question 28

Employee achievement awards (e.g. for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate with and annual monetary value____ under an established written plan which does not discriminate in favor of highly paid employees)

Fill in the Blanks

Answer 28

Not exceeding P10,000

Question 29

Laundry allowance not exceeding ____ and Gifts given during Christmas and major anniversary celebrations ____ per employee per annum is considered De Minimis Benefit

Answer 29

P300 per month; not exceeding P5,000

Question 30

Daily meal allowance for overtime work and night/graveyard shift not exceeding ____ of the basic minimum wage on a per region basis provided such benefit is given on account of overtime work or if given to employees on night/graveyard shift.

Fill in The Blanks

Answer 30

25%

The grant of meal allowance, if not for overtime work or night/graveyard shift, should be subject to income tax (RR 05-2011). However, meal allowance and lodging furnished by the employer to the employees are exempt from tax if furnished for the advantage or convenience of the employer’. Meal allowance, in this particular case, should be furnished within the premises of the employer.

Question 31

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 ____ per employee per taxable year

Answer 31

P10,000.00

BIR RULING No. 293-2015 (CBA/CNA and Productivity Incentive Pay):
If not more than P10,000 — considered as de minimis
If more than P10,000 -the entire amount shall be included in the “other benefits” with P90,000 ceiling.

Question 32

The amount of de minimis benefits conforming to the ceiling of de minimis benefits shall what?

Answer 32

Shall not be considered in determining the P90,000 ceiling of “other benefits” excluded from the gross income

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.

Question 33

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 “____”

Fill

Answer 33

“Other Benefits”

And is therefore subject to the 90,000 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 applicable creditable withholding taxes

Question 34

13th 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 that the total exclusion ____

Fill

Answer 34

Shall not Exceed 90,000

Otherwise, the excess would form part of an individual’s gross income and would be subject to income tax and applicable creditable withholding taxes.

Question 35

If 13th Month pay and other benefits doesn’t reach the ceiling of 90,000 how will it affect the compensation or the basic salary of an Employee . (Example: 13th Month Pay and other benefit is 70,000)

Answer 35

It will not affect the compensation; the 70,000 will be exempt, and the difference between the 70,000 and 90,000 will not be deducted from the compensation or basic salary.

provides that the amount of P90,000 exclusion shall “only” apply to “13’” month pay and other benefits” prescribed and shall not apply to other compareation received by an employee under an employer-employee relationship such as basic salary and other allowances.

Question 36

(under RR 2-98 Sec. 2. 78. 1(B) 11 “a” and“b”)
“Other Benefits” include:

Answer 36

• 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

Question 37

In general, fixed or variable allowances which are received by a public officer or employee or officer or employee of a private entity, in addition to the regular compensation, fixed for his position or office, is compensation subject to?

Answer 37

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 entertainment 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.

Question 38

Any amount paid specifically, either as advances or reimbursement for travelling, representation and other bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred by the employee in the performance of his duties are?

Answer 38

Not compensation subject to withholding, if the following conditions are satisfied:

(1) It is for ordinary and necessary travelling and representation or entertainment expenses paid or incurred by the employee in the pursuit of the trade, business or profession; and

(2) The employee is required to account/liquidate for the foregoing expenses in accordance with the specific requirements of substantiation for each category of expenses

Question 39

Employer leases a residential property for the use of the employee

Monetary Value is equal to

Answer 39

Rental paid x 50%

Question 40

Employer owns a residential property for the use of the employee

Monetary Value is equal to?

Answer 40

The higher between FMV in the Real property declaration or Zonal value x 5% x 50%

Annual Benefit = FMV or Zonal, whichever is higher x 5%
Monetary value of the benefit = FMV or Zonal, whichever is higher x 5% x 50%

Question 41

Employer purchases residential property in installment for use of the employee

Monetary Value is equal to?

Answer 41

Acquisition cost, exclusive of interest x 5% x 50%

Annual Benefit = Acquisition cost exclusive of interest x 5%
Monetary value of the benefit = Acquisition cost exclusive of interest x 5% x 50%

Question 42

Employer purchases residential property and transfers ownership to employee on a lesser amount

Monetary Value is equal to?

Answer 42

The higher between the FMV in the real property declaration or Zonal as determined by the CIR less cost to the employee

Question 43

Employer purchases residential property and transfers ownership to employee

Monetary Value is equal to?

Answer 43

The higher between the acquisition cost or Zonal value as determined by the CIR.

Question 44

Employer owns and maintains a fleet of motor vehicles for the use of the business and employees

Monetary Value is equal to?

Answer 44

Acquisition cost of vehicles not normally used for business divided by 5 years x 50%

Question 45

Employer leases/maintains a fleet of motor vehicles for the use of the business and the employees

Monetary Value is equal to?

Answer 45

Amount of rental payments not normally used for business purposes x 50%

Question 46

Employer purchases vehicle in the name of employee.

Monetary Value is equal to?

Answer 46

Acquisition Cost

Question 47

Employer provides employee with cash for the purchase of the vehicle, and ownership is placed in the name of the employee.

Monetary Value is equal to?

Answer 47

Cash received

Question 48

Employer purchases the vehicle on installment and ownership is placed in the name of the employee

Monetary Value is equal to?

Answer 48

Acquisition cost exclusive of interest / by 5 years

Question 49

Employer shoulders a portion of the amount of the purchase price of vehicle and ownership is placed in the name of the employee.

Monetary Value is equal to?

Answer 49

Amount shouldered by employer