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Cars or motor vehicles is a common fringe benefit of employers to managerial and supervisory employees in the Philippines.
Usual executive compensation package would provide a car plan under varying terms. For employers, motor vehicles are
indispensable to its operations and it has a choice whether to keep it as company property for use of the company or have
the motor vehicles specifically used by its employees for use both in business and for personal.
Fringe benefits tax applications would then vary depending on the extent of employee benefit – source of fund, ownership
under employee, and lease. Hereunder are the fringe benefits tax on motor vehicle variations in the Philippines and the
related fringe benefits application:
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 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.
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 benefits 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 Revenue Regulations No. 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 five (5) years. 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.
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
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.
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 five (5) years. The monetary value of the fringe benefit shall be fifty per cent (50%) of the value
of the benefit.
The monetary value of the motor vehicle fringe benefit is equivalent to the following:
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 fifty per cent (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
be subject to the fringe benefits tax.
The use of yacht whether owned and 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 a yacht at an estimated useful life of 20 years.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult
your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may
please send mail at info@taxacctgcenter.org.
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