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Fringe Benefit Exercises

This document provides information and examples about fringe benefits and fringe benefit tax (FBT) in the Philippines, including: - Formulas for calculating grossed-up monetary value and FBT rate - Examples of how to calculate FBT for various fringe benefits like housing, cash allowances, and more - The types of fringe benefits that are subject to FBT

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39 views

Fringe Benefit Exercises

This document provides information and examples about fringe benefits and fringe benefit tax (FBT) in the Philippines, including: - Formulas for calculating grossed-up monetary value and FBT rate - Examples of how to calculate FBT for various fringe benefits like housing, cash allowances, and more - The types of fringe benefits that are subject to FBT

Uploaded by

Get Burn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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A.

Fringe Benefit

Formula:
Grossed-up Monetary Value Pxxx
Rate xx%
FBT Pxxx

B. Grossed-up Monetary Value (GMV)

Formula:
1). GMV = Monetary Value (MV)/GMV Factor
GMV Factor = 100% - FBT Rate

2). GMV = MV + FBT

C. RATE
2018 Prior to 2018
RC, NRC, OCW, RA and 35% 32%
NRA-ETB
NRA-NETB 25% 25%
SFE 15%
SAE 15%

Problem Solving:
1. How much is the allowable deduction from business income of a domestic
corporation which granted and paid P102,000 fringe benefits to its key
officers in 2017?

What if in 2017: Answer, P150,000 (MV = 102,000/68%)


What if in 2018? Answer: (102,000/65%) = 156,923
2. In 2018, XYZ Corporation gave the following fringe benefits to its
employees:
To rank and file employees 5,000,000
To managerial employees 1,300,000
The allowable deduction from the gross income of the corporation for the
fringe benefits given to employees is: Answer, 7,000,000

Solution:
Allowable deduction:
To rank and file employees 5,000,000
To managerial employees (1,300,000/65%) 2,000,000
Total allowable deductions 7,000,000

3. Data from a managerial employee for taxable year 2018 revealed the
following:
Salaries and wages (net of SSS and philhealth
contributions amounting to 15,000 and
withholding tax of 26,000) 354,000
Allowance, not subject to liquidation 71,500
Gasoline allowance, subject to liquidation 30,000
13 month pay
th 20,000

Required:
a). Compute the taxable compensation income subject to graduated rates?
Answer, 380,000 (354,000+26,000)

b). Based on the above problem, compute the fringe benefit tax due?
Answer, P38,500 (71,500/65% x 35%)
4. In the year 2017, Bank of Philippine Archipelago, Inc. paid for the quarterly
rental of a residential house of its branch manager, Mr. Tolentino,
amounting to P68,000.
a). How much is the fringe benefit expense? Answer, P68,000
b). How much is the fringe benefit tax? Answer, P16,000
Solution: MV = P68,000 @ 50% = P34,000/68% = 50,000@32% = 16,000
Housing:
Employer leases a residential property for MV = Rental Paid x 50%
the use of his employee.

What if in 2018?
Solution: MV = P68,000 @ 50% = P34,000/65%@35% = P18,308
5. International Phone, Inc. owns a condominium unit. During the year 2018,
it allowed its CEO to use the said property as his residence. The zonal value
of the property is P10,000,000 while its fair market value as shown in its
current Real Property Tax Declaration amounts to P8,000,000

Housing privilege: Fringe benefit tax base

1). Assignment of residential MV = (5% [FMV or ZV, whichever is


property for use of employees. higher] x 50%

a). How much is the fringe benefit expense/monetary value?


MV = (5% [10,000,000] x 50%
= 250,000

Grossed-up Monetary Value = 250,000/65%


= 384,615.38

b). Based on the preceding number, how much is the quarterly fringe
benefit tax expense? Answer, P384,615.38 @ 35% = 134,615.38/4 = 33,654

c). Using the same data in letter b and assuming that the acquisition cost of
the residential property is P7,000,000 and the remaining useful life is 15
years. How much is the monetary value? Answer, P200,000 (FMV, higher =
10,000,000 – 7,000,000 = Benefit, 3,000,000/15 years = 200,000

Housing privilege:
1). Employer purchases a MV = (FMV vs. ZV whichever
residential property and transfers higher) – Cost to the employee
ownership to his employee at a
price less than the acquisition cost.
5). In 2017, Bangko ng Ginto Inc. bought a residential property on
installment for the use of its Comptroller. The total amount paid by the
bank is P5,500,000 gross of 10% interest. The fair market value of the
property per Tax Declaration is P6,000,000 while the zonal value is
P5,236,000.

a) How much is the annual fringe benefit tax?


Housing privilege:

Purchase of residential property on MV = 5% x AC x 50%


installment basis for the use of
employees. Where: AC = Acquisition cost,
exclusive of interest

Answer: P5,500,000/1.1 = 5,000,000 @ 5% @ 50% = 125,000/68%@32% =


58,824

b). Based on the preceding number, assuming the ownership over the
property will be transferred to the Bank’s Comptroller, how much is the
fringe benefit tax?

Housing privilege:

Employer purchases a residential MV = AC vs ZV whichever higher


property and transfers ownership
in the name of the employee.

Given:
AC = 5,500,000 inclusive of interest = 5,500,000/1.1 = 5,000,000
ZV = 5,236,000

Answer: P5,236,000/68%@32% = 2,464,000


6). In 2018, Jane Corporation purchased a residential house and lot for
P2,300,000. The property was later sold to its General Manager for
P1,980,000. The fair market value per Assessor’s Office is P2,200,000 while
the zonal value is P2,100,000. How is the fringe benefit tax? Answer,
118,462

Answer: FMV/ZV whichever higher 2,200,000


Less: AC 1,980,000
MV 220,000/65%@35%

7). Ann employer gave P1,312,500 cash to the employee to purchase any
vehicle of his desire. However, the employee purchased a brand new car
only worth P1,200,000. Assuming that the employee is a non-resident alien
not engaged in trade or business, how much is the grossed-up monetary
value? Answer, P1,312,500/75% = P1,750,000

8). Allan, single, is a minimum wage earner of ABC Corporation. He is also


engaged in trading various consumer products every weekend. He derived
profit therefrom amounting to P300,000 for the 2018 taxable year. In
addition to his basic minimum wage of P160,000 for the year, he likewise
received the following additional benefits from the employer:
 De minimis, P40,000 (all within the ceiling)
 13th month pay and other benefits, P68,000

Compute Allan’s taxable income? Answer, P300,000

9). Which of the following is subject to fringe benefit tax?


A. Basic salary of the rank and file employees
B. Basic salary of the supervisory or managerial employees.
C. Fringe benefit of the rank and file employee
D. Fringe benefit of the supervisory or managerial employee

10). An employer subject to fringe benefit tax may be a/an


A. An individual
B. General professional partnership
C. Corporation
D. All of the above.

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