Tax Fringe Benefits

Question 1

What are the sources of Fringe Benefits?

Answer 1

Housing
Expense Accounts
Vehicle
Household Personnel
Interest on a Loan less than the market rate
Membership Fees
Expenses for foreign travel
Holiday and Vacation expenses
Educational Assistance to the employee or their dependents
Insurance premiums or similar amounts

Question 2

Any good, service, or benefit provided in cash/kind by an employer to an individual employee, in addition to the basic salary but not limited to the following.

Answer 2

Fringe Benefit

Question 2

These are employees who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgement

Answer 2

Supervisory Employee

Question 3

These are employees who are not in a managerial or supervisory position

Answer 3

Rank and File employee

Question 3

These include those who are vested with powers or prerogatives to lay down and execute management policies, and/or to hire. transfer, suspend, lay-off, recall, discharge, assign, or discipline employees

Answer 3

Managerial Employees

Question 4

How are Rank and File employees treated compared to the other 2 employees in regards to taxes?

Answer 4

Rank and File are included as part of the Gross Taxable Income model, and by extension subject to Basic Tax

Managerial/Supervisory Employees, are not part of the GTI but subject to the Fringe Benefit Tax which is a final tax

Question 4

What are non taxable fringe benefits?

Answer 4

1. Benefits given to the employee that is required by the nature of, or necessary to, the trade, business, or profession of the employer
2. Benefits given to the employee for the convenience/advantage of the employer
3. De Minimis Benefits
4. Benefits granted to rank and file employees whether or not they’re in a collective bargaining agreement
5. Benefits authorized and exempt from tax under special laws
6. Contributions of the employer for the benefit of the employee to retirement, insurance, and hospitalization benefit plans

Question 5

What is the Formula for Fringe Benefit Tax? (FBT)

Answer 5

Ver 1: FBT= (FBV / (1-Rate)) x Rate
Ver 2: FBT = GUMV - MV (Grossed Up & Monetary Value)
GUMV = MV/1-Rate

Step 1: Plug in Value
Ex: If value is 100k then FBV = 100k
Step 2: Plug in respective rate (65/35)/(75/25)
Ex: 100k / 65% = 153,846
Step 3: Plug in the other rate
Ex: 153,846 x 35% = 53,846

FBT = 53,846

Question 5

In the FBT formula, when should you use a 35/65% split and when do you use a 25/75% split when calculating the tax?

Answer 5

RC/NRC/RA/NRAETB = 35/65%
NRANETB = 25/75% split

Question 6

What is the general rule when computing the monetary value for cash?

Answer 6

If its cash then MV = Cash Given or Paid
If its cash from rent then MV = 1/2 of Cash Given or Paid

Remember this is just MV, you still have to do the 65/35 for FBT

Question 7

What is the general rule when computing the monetary value In Kind?

Answer 7

If it is In Kind, then MV = Purchase Price or Fair Market Value of the property, or the book value (whichever is highest)
FBE = FBT

Remember this is just MV, you still have to do the 65/35 for FBT

Question 7

What is the general rule when computing the MV with Use of Property?

Answer 7

MV = 50% of depreciation
FBE = FBT
Further divided by useful life
5 if its personal property (Movable and not tied to anything)
20 if its real property (Immovable and

Ex: MV = 50% of (Purchase Price, Book Value, Fair Market Value / Useful Life)

Remember this is just MV, you still have to do the 65/35 for FBT

Question 7

What is the general rule when computing the MV with purchase of car in installments?

Answer 7

MV = Purchase Price Divided by 5
Then that only 50% of that is considered if it is in Use
SIR USES “For the use” TO INDICATE THIS

And 100% of that is considered if it is fully given over
SIR USES “In the name” TO INDICATE THIS
INTEREST NOT INCLUDED

Remember this is just MV, you still have to do the 65/35 for FBT

Question 7

What is the general rule when computing the MV with purchase of real property in installments?

Answer 7

MV = Purchase Price Divided by 20
Then that only 50% of that is considered if it is in Use
And 100% of that is considered if it is fully given over
INTEREST NOT INCLUDED

Remember this is just MV, you still have to do the 65/35 for FBT

Question 8

What is the general rule when computing the MV with foregone interest on loans granted?

Answer 8

MV = (Principal x (12% - Rate)) x T
12% is the standard interest rate
Time is measured in years so if time is 1 year then its x 1
If time says 6 months then you go x 0.5 since 6 months is half a year

Remember this is just MV, you still have to do the 65/35 for FBT

Question 8

What is the rule for computing taxes on foreign travel without documentation?

Answer 8

If there is no documentation for the travel then ALL of it is taxable (100% of the cost)

Question 9

What is the rule for computing taxes on foreign travel with documentation?

Answer 9

If there is documentation then
Business Class/Economy Ticket is Exempt

First Class Tickets are taxed 30% as Fringe benefit

Lodging Expenses are Exempt

Food, Beverages, and Transportation has $300/day exempt but any excess is taxable

Question 9

What is the rule for computing taxes on Educational assistance for employees and dependents?

Answer 9

For employees, if its related to business/obligation to remain in the employ of the employer it is EXEMPT, otherwise Taxable

For the dependents. if provided under competitive scene then it is NON TAXABLE

Question 10

What is the general rule when computing the MV with use of Aircraft, Helicopter or Yacht?

Answer 10

Aircrafts and Helis aren’t subject to tax
Yacht is taxed and MV = Cost/20