Chapter 4-Fringe Benefits

Chapter 4
Special Treatment of Fringe Benefits

What is fringe benefit?
Does not form part of gross income tax
liability of an individual employee
Fringe benefit tax is subject to a final
withholding tax
The taxable fringe benefit (grossed-up
monetary value) and the fringe benefit tax
constitute allowable deductions from the
gross income of the employer
Terms
Fringe benefit
any good, service or other benefit furnished or granted
by an employer in cash or in kind in addition to basic salaries to
individual employees
Rank and file employees
those not holding managerial or supervisory positions
Managerial Employees
those vested with powers to lay down and execute
management policies
Terms
Grossed-up Monetary Value
refers to the whole amount of income realized by the
employee = net amt of money or monetary value of property +
fringe benefit tax thereon
De Minimis Benefits
Facilities or privileges furnished or offered by an
employer to his employees that are relatively of small value
Tax Base
Imposed on the grossed up monetary value of

the fringe benefit furnished by the employer
to managerial and supervisory employees;
employer maybe an individual, professional
partnership or corporation
Tax Base
General: Non-Resident Alien Not
Effective TY 2000 - 32% Engaged in Trade
How to compute grossed-up How to compute grossed-up

monetary value: monetary value:
Monetary Value of Fringe Benefit

75%
68%
Thus:
Thus: Acquisition Cost / 75% =
Acquisition Cost / 68% = Grossed-up Monetary Value
x 25%
Grossed-up Monetary
Value x 32%
Tax Base
For Alien Engaged in Trade or Business
How to compute grossed-up monetary value:

85%
Thus:
Acquisition Cost / 85% = Grossed-up
Monetary Value x 15%
How to determine Monetary Value
1) If fringe benefit granted is money = amount

granted or paid for
2) If fringe benefit is property and ownership is
transferred to employee = value is the fair
market value of the property
3) If fringe benefit is property and ownership is
not transferred to employee = value is
depreciation value of the property
Fringe Benefits and their Monetary
Values - Housing Privileges
If the employer owns a
If the employer leases a residential property
residential property where the employee
where the employee resides, monetary value
resides, then monetary is:
value = 50% of rental MV or Zonal Value
paid whichever is higher x
5% = Annual Value x
50%
Value - Housing Privileges
If the employer purchases If the employer purchases

a residential property a residential property
where the employee and transfers ownership
resides, then monetary to the employee, then
value = Acquisition cost, monetary value =
exclusive of interest x Acquisition cost or
5% = Annual Value x zonal value, whicever is
50% higher
Values - Housing Privileges
If the employer purchases a residential property
and transfers ownership to the employee for
residential use at a price less than the
employers acquisition cost, then monetary
value is:
FMV or Zonal Value, whichever is higher
Less: Cost to Empolyee
Values - Expense Accounts
Expenses incurred by the employee but
which are paid for or reimbursed by the
employer, except:
- when the expenses are duly receipted
for in the name of the employer and;
- when the expenses do not partake the
nature of personal expenses attributable to
the employee
Values - Motor Vehicles
If the employer purchases If the employer gives the
the motor vehicle in the employee cash to
name of the employee purchase and own a
monetary value equals motor vehicle, monetary
acquisition cost value equals the cash
received by the
employee
If the employer purchases If the employer partially
a car on installment shoulders the purchase
basis with the employee price of a motor vehicle
as owner, monetary with the employee as
value is = acquisition owner, monetary value
cost, exclusive of is = amount shouldered
interest / 5 years by the employer
If the employer owns and If the employer leasess
maintains a fleet of motor and maintains a fleet of
vehicles for the use of the motor vehicles for the use
business and employees, of the business and
monetary value = acquisition employees, monetary
cost of vehicles not used for value = amount of rental
business or non-personal payment for vehicles not used
use / 5 years x 50% for business x 50%
Use of helicopters and Use of the yatch
aircraft owned and whether owned or
maintained by the maintained by the
employer shall be employer shall be
treated as for business treated as taxable fringe
use and shall not be benefit, thus monetary
subject to the fringe value = depreciation of
benefit tax yatch at useful life of 20
years
Other Fringe Benefits
Household Expenses Interest on loans at less
- refer to salary of than market value
household help, driver - if employer lends to
or other similar employee at rate lower
expenses, borne by the than 12%, the difference
employer, are taxable in rate is taxable fringe
fringe benefits benefit
Expenses for foreign
Membership fees, dues
travel - foreign travel to
attend business
and other expenses meetings or
borne by employer - conventions are not
taxable fringe benefits taxable fringe benefits,
in full except:
- lodging of $300 or less
per day, and
- 30% cost of first class
ticket
Holiday and Vacation Education assistance to
Expenses of the the employee or his
employee borne by the dependents - taxable
employer benefit unless the study
treated as taxable is directly connected
fringe benefits with the employers
trade and he has to
remain in the employ
under a period agreed
Life or health insurance and other non-life
insurance premiums - treated as taxable
benefit except:
- contributions for SSS and GSIS
- cost of premiums borne by the employer
for group insurance of employees
Fringe Benefits Not Subject to fringe
Benefits Tax
Fringe benefits authorized and exempted under the
law
Contribution of the employer for the benefit of the
employee to retirement, insurance and hospitalization
benefits
Benefits given to rank and file employees
De minimis benefits
If grant of benefits is required by the nature or
necessary to business
If the grant of the benefit is for the convenience of the
employer

Chapter 4-Fringe Benefits

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Chapter 4

Special Treatment of Fringe Benefits

Imposed on the grossed up monetary value of

How to compute grossed-up How to compute grossed-up

Monetary Value of Fringe Benefit

How to compute grossed-up monetary value:

Monetary Value of Fringe Benefit

1) If fringe benefit granted is money = amount

If the employer purchases If the employer purchases

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