FRINGE BENEFITS TAX

A. Definition of Fringe Benefits per Section 33 of NIRC

FRINGE BENEFITS – means “any good, service, or other benefit furnished granted by an employer, in cash or
in kind, in addition to basic salaries, to an individual employee such as, but are not limited to, the following:

1. Housing
2. Expense account
3. Vehicle of any kind
4. Household personnel, such as maid, driver, and others
5. Interest on loan at less than the market rate
6. Membership fees, dues and other expenses borne by the employer for the employee in social and athletic
clubs
7. Holiday and vacation expenses
8. Expenses for foreign travel
9. Educational assistance to the employee or his dependents
10. Life or health insurance and other non-life insurance in excess of what the law allows

B. FRINGE BENEFIT TAX BASE AND RATE

The fringe benefit tax is a final tax on the employer’s income to be withheld by the employer. The
withholding and remittance of FBT shall be made on a quarterly basis.

The tax base of the fringe benefit is based on the grossed-up monetary value (GMV) of the fringe benefits
furnished, granted or paid by the employer to the employee, except rank and file employees.

The grossed-up monetary value factor effective January 1, 2018 is 65%

The grossed-up monetary value is determined by dividing the monetary value (MV) of the fringe benefits
by 65% (GMV factor).

The rate of the fringe benefit tax to be applied is 35%.

GROSSED-UP MONETARY VALUE = net monetary value (MV) of the fringe benefits plus the amount of
fringe benefit tax (FBT)

C. VALUATION OF FRINGE BENEFITS

CONDITION VALUATION

1) If FB is granted in money, or is The monetary value (MV) is the

directly paid for by the employer, amount granted or paid for
 2) If the FB is granted or furnished The MV of the FB shall be equal to
by the employer in property other the FMV of the property as
than money and ownership is determined in accordance with Sec.
transferred to the employee, 6 (E).

3) If FB is granted or furnished by The MV of the FB is equal to the

the employer other than money but depreciated value of the property.
ownership is not transferred to the
employee,

D. FORMULA IN DETERMINING THE MV OF A HOUSING PRIVILEGE

CONDITION VALUATION

1) Lease of residential property MV = rental paid x 50%

for residential use of employees.

2) Employer owns the residential MV = FMV or ZV whichever is

property where the employee higher x 5% = Annual value x 50%
resides.

3) Employer purchases the MV = AC exclusive of interest x 5%

residential property where the = Annual value x 50%
employee resides.

4) Employer purchases the MV = AC or ZV whichever is higher

residential property and transfers
ownership to the employee.

5) Employer purchases the MV = FMV or ZV whichever is

residential property and transfers higher – cost to the employee
ownership to the employee at a
price less than the employer’s
acquisition cost.

Note: In No. 2, if the residential MV = FMV or ZV whichever is

property owned by the employer higher less the cost or book value
has a BV or AC lesser than the divide by the remaining useful life of
FMV or ZV. the property = Annual amortization
E. FORMULA IN DETERMINING THE MV OF A MOTOR VEHICLE AS FRINGE BENEFIT

CONDITION VALUATION

1) Purchase of a motor vehicle in MV = Acquisition Cost

the name of the employee.

2) Cash is given to employee for MV = Cash received by the

the purchase of vehicle; ownership employee
is transferred to employee.

3) Purchases the vehicle on MV = Acquisition Cost (exclusive of

installment basis and transfers interest / 5 years)
ownership to the employee.

4) Employer shoulders a portion MV = Amount shouldered by the

of the vehicle purchase price and employer
transfers ownership to the
employee.

5) Employer owns and maintains MV = (AC / 5) x 50%

a fleet of motor vehicles for the use
of the business and the employees.

6) Employer leases and maintains MV = Rental payment x 50%

a fleet of motor vehicles for the use
of the business and the employees.

Note:

(a) The use of aircraft, including helicopters, owned and maintained by the employer shall
be treated as business use and is not subject to the fringe benefit tax.

(b) The use of yacht whether owned and maintained or leased by the employer shall be
treated as taxable fringe benefit. The monetary value (MV) shall be based on the
depreciation of yacht at an estimated useful life of 20 years. (Acquisition cost / 20 years)
F. EXPENSES FOR FOREIGN TRAVEL AS TAXABLE FRINGE BENEFIT

Foreign travel by the employee(s) in attending business meetings or conventions shall not be treated as
taxable fringe benefits. This includes inland travel expenses (for food, beverages, and local transportation) and
the cost of economy and business class airplane ticket. However, the following are subject to fringe benefit tax:

(a) For lodging cost in a hotel or similar establishment, any cost incurred in excess of an average
US$300 per day shall be subject to fringe benefit tax.

(b) If the plane ticket is first class, 30% of cost of ticket shall be subject to fringe benefit tax.

(c) Travel expenses, which are paid by the employer for the travel of the family members of the
employee, shall be treated as taxable fringe benefits.

(d) In the absence of documentary evidence showing that the employee’s travel abroad was in
connection with business meetings or conventions, the entire travel expenses shouldered by the
employer shall be treated as taxable fringe benefits.

G. EDUCATIONAL ASSISTANCE TREATED AS TAXABLE FRINGE BENEFITS

General Rule:

The cost of educational assistance extended to the managerial employee by the employer including that of
its dependents shall be treated as taxable fringe benefits, except –

(a) If the scholarship grants are directly connected with the employer’s trade, business or profession.

(b) There is a written contract between the employer and the employer to effect that the employee
would be under the obligation to remain in the employ of the employer for a certain period.

(c) For employee’s dependents, there was provided a competitive scheme under the scholarship
program of the company.

H. INSURANCE BENEFITS TREATED AS TAXABLE FRINGE BENEFITS

The cost of premiums for the life or health insurance and other non-life insurance borne by the
employer for his employer shall be treated as taxable fringe benefit, except –

(a) Contributions of the employer to the SSS of the employee.

(b) The cost of premiums borne by the employer for the group insurance of his employees.