FRINGE BENEFIT TAX

 Characteristics of Fringe Benefit Tax

1. Final Tax – monetary value is net of final tax
2. Tax upon managerial and supervisory employees
3. Paid by employer
4. Due quarterly (BIR Form 1603)
 Manual filing should be filed on or before the 10th day of the month following the
quarter in which withholding is made
 EFPS filing should be filed on or before the 15th day of the month following the quarter
in which withholding is made

 Rules on Valuation of Fringe Benefit

1. When benefit is paid in cash, monetary value is the amount paid.
 Exception: rental payment for residence of employee- monetary value = 50% of rental
payment.

2. When benefit is paid in kind, monetary value is the amount given.

 When the ownership is transferred to the employee, the monetary value is the whole
fair value (less amount shouldered by employee, if any) regardless of usage.

3. If benefit is given for free usage of employer’s property (business property), monetary value
is 50% of the rental payment or depreciation value of the property.
 For purpose of depreciation: 5 years for personal asset and 20 years for real asset
(including land even not subject to depreciation)

 Exempt Housing Previleges

1. Housing for AFP military official which is accessible for
2. Housing unit situated 50 meters from business premises
3. Temporary housing units (3 months)

 Other items subject to Fringe benefit tax

1. Interest forgone by employer (12% less rate of borrowing by employee) due to borrowings
by employee.
2. Expenses by family members of the employee on business convention and meeting
shouldered by employer.
3. Unreasonable business expenses for foreign travel for attending business meeting, like:
a. Food, beverage and transportation expenses exceeding $300 per day
 b. First class tickets – 30% of price is taxable fringe benefit
4. Educational assistance granted to dependents of the employee, provided that it is not
through competitive scheme.
5. Insurance premiums in excess of what law allows

 Exempt Fringe Benefits

1. Fringe benefit which are authorized and exempted from tax under special laws.
2. Benefits required by the nature of business of employer
3. Benefit given for the convenience or advantage of employer
4. Contribution of employer for the benefit of employee to retirement, insurance and
hospitalization plans
5. Benefits given to rank and file employees
6. De minimis benefits not in excess of their limit

 Fringe Benefit Tax Rates

1. Resident or Citizen – 32%
2. Special Alien – 15%
3. Non-resident Alien – 25%

 Other Ideas to remember

1. Fringe benefit expense is equal to the total amount paid excluding tax.
2. Fringe benefit tax expense is deductible expense to the employer against his gross income.