—In general, except as otherwise provided under these regulations, for purposes of this Section, the term “fringe

benefit” means any good, service, or other benefit furnished or granted by an employer in cash or in kind, in addition
to basic salaries, to an individual employee (except rank and file employee as defined in these regulations) such as,
but not limited to the following:
—(1) Housing privilege –
—If the employer leases a residential property for the use of his employee and the said property is the usual place of
residence of the employee, the value of the benefit shall be the amount of rental paid thereon by the employer. The
monetary value of the benefit shall be 50% of the value of the benefit.
—If the employer owns a residential property and the same is assigned for the use of his employees as his usual
place of residence, the annual value of the benefit shall be 5% of the market value or zonal value of land and
improvement which ever is higher. The monetary value shall be 50% of the value of the benefit.
—MV = [5% (FMV or ZV] x 50%
—If the employer purchases a residential property on installment basis and allows his employee to use the same as
his usual place of residence, the annual value of the benefit shall be 5% of the acquisition cost, exclusive of
interest. The monetary value shall be 50% of the value of the benefit.
—If the employer purchases a residential property and transfers ownership therof in the name of the employee, the
value of the benefit shall be the employer’s acquisition cost or zonal value (FMV) whichever is higher. The monetary
value shall be the entire value.
—If the employer purchases a residential property and transfers ownership to his employee for the latter’s residential
use, at a price less than the employer’s acquisition cost, the value of the benefit shall be the difference between the
FMV or ZV whichever is higher and the cost to the employee. The monetary value shall be the entire value of the
benefit.
—Housing privilege of military officials of the AFP consisting of officials of the Philippine Army, Philippine Navy and
Philippine Air Force shall not be treated as taxable fringe benefit in accordance with the existing doctrine that the
State shall provide its soldiers with necessary quarters which are within or accessible from the military camp so that
they can be readily on call to meet the exigencies of their military service.
—A housing unit which is situated inside or adjacent to the premises of a business or factory shall not be considered
as a taxable fringe benefit (considered adjacent if the unit is located within the maximum fifty meters from the
perimeter of the business premises.
—Temporary housing for an employee who stays in a housing unit for three months or less shall not be considered a
taxable fringe benefit.

—(2) Expense account –

—In general, expenses incurred by the employee but which are paid by his employer shall be treated as taxable
fringe benefits, except when the expenditures are duly receipted for and in the name of the employer and the
expenditures do not partake the nature of a personal expense attributable to the employee.
—Expenses paid for by the employee but reimbursed by his employer shall be treated as taxable benefits except only
when the expenditures are duly receipted for and in the name of the employer and the expenditures do not partake
the nature of a personal expense attributable to the said employee.
—Personal expenses of the employee (e.g. groceries for personal consumption) paid for or reimbursed by the
employer to the employee shall be treated as taxable fringe benefits.
—Representation and transportation allowances which are fixed in amounts and are regularly received by the
employees as part of their monthly compensation income shall not be treated as taxable fringe benefits but
considered as taxable compensation income subject to tax imposed in Section 24 of the Tax Code.
—
—(3) Motor vehicle of any kind –
—If the employer purchases the motor vehicle in the name of the employee, the value of the benefit is the acquisition
cost thereof. The monetary value shall be the entire value of the benefit, regardless, of whether the motor vehicle is
used by the employee partly for his personal purpose and partly for the benefit of his employer.
—If the employer provides the employee with cash for the purchase of a motor vehicle, the ownership of which is
placed in the name of the employee, the value of the benefit shall be the amount of cash received by the
employee. The monetary value of the fringe benefit shall be the entire value of the benefit regardless of whether the
motor vehicle is used by the employee partly for his personal purpose and partly for the benefit of his employer,
unless the same was subjected to a withholding tax as compensation income under RR 2-98.
—
—If the employer purchases the car on installment basis, the ownership of which is placed in the name of the
employee, the value of the benefit shall be the acquisition cost exclusive of interest, divided by 5 years. The
monetary value of the fringe benefit shall be the entire value regardless of whether the motor vehicle is used by the
employee partly for his personal purpose and partly for the benefit of his employer.
—If the employer shoulders a portion of the amount of the purchase price of a motor vehicle the ownership of which
is placed in the name of the employee, the value of the benefit shall be the amount shouldered by the employer. The
monetary value shall be the entire value of the benefit regardless of whether the motor vehicle is used by the
employee partly for his personal purpose and partly for the benefit of his employer.
——

—If the employer owns and maintains a fleet of motor vehicles for the use of the business and the employees, the
value of the benefit shall be the acquisition cost of all the motor vehicles not normally used for sales, freight, delivery
service and other non-personal used divided by 5 years. The monetary value shall be 50% of the value of benefit.
—If the employer leases and maintains a fleet of motor vehicles for the use of the business and the employees, the
value of the benefit shall be the amount of rental payments for motor vehicles not normally used for sales, freight,
delivery service and other non-personal use. The monetary value of the fringe benefit shall be 50% of the value of
the benefit.
—The use of aircraft (including helicopters) owned and maintained by the employer shall be treated as business use
and not to be subject to FBT.
—The use of yacht whether owned or maintained or leased by the employer shall be treated as taxable fringe
benefit. The value of the benefit shall be measured based on the depreciation of the yacht at an estimated useful life
of 20 years.
—(4) Household expenses – Expenses of the employee which are borne by the employer for household personnel,
such as salaries of household help, personal driver of the employee, or other similar personal expenses (e.g.
association dues, etc.) shall be treated as taxable fringe benefits.
—(5) Interest on loan at less than market rate –
—If the employer lends money to his employee free of interest or at a rate lower than 12%, such interest forgone by
the employer or the difference of the interest assumed by the employee and the rate of 12% shall be treated as a
taxable fringe benefit.
—The benchmark interest rate of 12% shall remain in effect until revised by a subsequent regulation.
—This regulation shall apply to installment payments or loans with interest rate lower than 12%.

—(6) Membership fees, dues, and other expenses borne by the employer for his employee, in social and athletic
clubs or other similar organizations – These expenditures shall be treated as taxable fringe benefits of the employee
in full.
—(7) Expenses for foreign travel –
—Reasonable business expenses which are paid for by the employer for foreign travel of his employee for the
purpose of attending business meetings or conventions shall not be treated as taxable fringe benefits. In this
instance, inland travel expenses (such as food, beverages and local transportation) except lodging cost in a hotel (or
similar establishments) amounting to an average of $300.00 or less per day shall not be subject to a FBT. The
expenses should be supported by documents proving the actual occurrences of the meetings or conventions
—The cost of economy and business class airplane ticket shall not be subject to a fringe benefits tax. However, 30%
of the cost of first class ticket shall be subject to FBT.
—In the absence of documentary evidence showing that the employee’s travel abroad was in connection with
business meetings or conventions, the entire cost of the ticket, including cost of hotel accommodations and other
expenses incident thereto shouldered by the employer shall be treated as taxable fringe benefits. The business
meetings shall be evidenced by official communications from business associates abroad indicating the purpose of
the meetings. Business conventions shall be evidenced by official invitations/communications from the host
organization or entity abroad. Otherwise, the entire cost thereof shouldered by the employer shall be treated as
taxable fringe benefits of the employee.
—Traveling expenses which are paid by the employer for the travel of the family members of the employee shall be
treated as taxable fringe benefits of the employee.
—(8) Holiday and vacation expenses of the employee borne by his employer shall be treated as taxable fringe
benefits.
—(9) Educational assistance to the employee or his dependents –
—(a) The cost of the educational assistance to the employee borne by the employer shall, in general, be treated as
taxable fringe benefits. However, a scholarship grant to the employee by the employer shall not be taxable fringe
benefit if the education or study involved is directly connected with the employer’s trade, business or profession, and
there is a written contract between them that the employee is under obligation to remain in the employ of the
employer for period of time that they have mutually agreed upon, thus the expenditure shall be treated as incurred for
the convenience and furtherance of the employer’s trade or business.
—The cost of educational assistance extended to the dependents of an employee shall be taxable fringe benefits
unless the assistance was provided through a competitive scheme under the scholarship program of the company.