Income Tax - Fringe Benefits Flashcards
The term fringe benefit, as provided in the amended National Internal Revenue Code (NIRC) Section 33(B), means any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee such as but not limited to, the following:
Housing;
Expense account;
Vehicle of any kind;
Household personnel, such as maid, driver and others;
Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted;
Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations;
Expenses for foreign travel;
Holiday and vacation expenses;
Educational assistance to the employee or his dependents; and
Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.
These benefits are subject to final withholding taxes on the grossed-up monetary value (tax base) of the benefit furnished.
However, the fringe benefit is exempt from final withholding tax if it’s required by the nature of or necessary to the trade, business or profession of the employer; or when the fringe benefit is for the convenience or advantage of the employer.
The following benefits are also not subject to final withholding tax as per amended NIRC Sec. 33 (C):
Fringe benefits which are authorized and exempted from tax under special laws;
Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans;
Benefits given to rank and file employees which is subject to the rule under amended NIRC Sec. 32 and;
De minimis benefits as defined and enumerated in amended RR 3-1998.
Employee is a citizen/resident alien/non-resident alien engaged in trade or business within the Philippines
Thirty-five percent (35%)
Employee is a non-resident alien not engaged in trade or business within the Philippines
Thirty-five percent (25%)
Moreover, these fringe benefits shall not be forming part of the gross compensation income subject to withholding tax on compensation of the managerial or supervisory employees.
Quarterly Remittance Return of Final Income Taxes Withheld on Fringe benefits Paid to Employees Other Than Rank and File
BIR FORM NO. 1603-Q
Valuation Rules - Fringe benefit given in kind:
MV = Higher of Fair Value and Book Value
Valuation Rules - Free use of property:
Rental Value - 50%
Depreciation Value:
Presumptive UL = 20yrs for real property. 5yrs for personal property
What is the monetary value of the fringe benefit if
The employer leases real property for the use of the employee as usual residence?
MV = 50% of the lease payment
What is the monetary value of the fringe benefit if
The employer purchased the real property on installment and allows the employee to use it as his usual residence?
MV = 5% x 50% x Acquisition Cost Exclusive of Interest
What is the monetary value of the fringe benefit if
The employer purchased the real property on installment and TRANSFERS OWNERSHIP to the employee entirely?
MV = 100% of the HIGHER of the Acquisition Cost or ZONAL VALUE ONLY AS DETERMINED BY THE CIR
What is the monetary value of the fringe benefit if
The employer purchased the real property on installment and FOR A LESSER CONSIDERATION, TRANSFERS OWNERSHIP to the employee?
MV = Higher of the FMV in the Real Property Declaration or
ZONAL VALUE as det by CIR ONLY
LESS COST TO THE EMPLOYEE
What are fringe benefit tax-exempt housing privileges?
1) Quarters of AFP, PAF, PA, PN
2) Housing unit adjacent to premises of business - within 50km
3) Temporary Housing (less than 3 mos)
What is the monetary value of the fringe benefit if the motor vehicle is purchased for the employee?
MV = 100% Cost
What is the monetary value of the fringe benefit if the employer purchases a motor vehicle on installment for the employee’s use?
MV = Cost ÷ 5 yrs
*excl of interest
What is the monetary value of the fringe benefit if the employer partially shoulders the cost of a motor vehicle purchased in the employee’s name?
MV = Portion shouldered by the employer
What is the monetary value of the fringe benefit if the employer provides cash to the employee to purchase a motor vehicle in the employee’s name?
MV = Cash received
What is the monetary value of the fringe benefit if the employer OWNS and MAINTAINS a fleet of motor vehicles for the use of the business and employees?
MV = Acquisition Cost of Vehicles NOT NORMALLY USED IN BUSINESS ÷ 5 yrs x 50%
