FRINGE BENEFIT
FRINGE BENEFIT TAX
– is a final income tax on the employee which shall be withheld and paid by the employer on a quarterly basis.
FRINGE BENEFIT
– 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 employees) such as, but not limited to the following: 1. Housing 2. Expense Account
FRINGE BENEFIT
3. Vehicle of any kind 4. Household personnel, such as maid, driver and others 5. Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted. 6. Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs and similar organizations
FRINGE BENEFIT
7.
Expenses for foreign travel
8.
Holiday and vacation expenses
9. Educational assistance to the employee or his dependents; and 10. Life or health insurance and other non-lire insurance premiums or similar amounts on excess of what the law allows.
PERSONS LIABLE
The EMPLOYER (as a withholding agent), whether individual, professional partnership or a corporation, regardless of whether the corporation is taxable or not, or the government and its instrumentalities
TAX RATE : 35% effective Jan 1, 2018 – The 35% tax rate shall be imposed on the Grossed-up monetary value of the Fringe benefit furnished to an employee (except rank
and file) Note: If the fringe benefit is required by the nature of, or necessary to the trade, business or profession of the employer, or when the fringe benefit is given for the convenience of the employer = Not taxable fringe benefit
SPECIAL FBT RATES
– NRANEBT 25% – *Aliens employed by regional HO 15 % – *Aliens employed by OBU 15% – *Aliens employed by Petroleum Service Contractors and Subcontractors 15%
– *Filipino employed occupying same position as above *If the benefit is already existing prior the effectivity of TRAIN LAW
GROSSED UP MONETARY VALUE “GMV” of the fringe benefit shall be determined by dividing the
monetary value of the fringe benefit by the Grossed up divisor. The Grossed up divisor is the difference between 100% and the applicable rates. Grossed-up MV= Monetary value / 65%
FRINGE BENEFITS NOT SUBJECT TO FBT 1.Fringe benefits not considered as gross income – a. if it is required or necessary to the business of employer b. if it is for the convenience or advantage of employer 2. Fringe Benefit that is not taxable under Sec. 32 (B) – Exclusions from Gross Income 3. Fringe benefits not taxable under Sec. 33 Fringe Benefit Tax: a. Fringe Benefits which are authorized and exempted under special laws, such as the 13th month Pay and Other Benefits with the ceiling of P90, 000.
FRINGE BENEFITS NOT SUBJECT TO FBT b. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; c. Benefits given to the Rank and File Employees , whether granted under a collective bargaining agreement or not; and d. The De minimis benefits – benefits which are relatively small in value offered by the employer as a means of promoting goodwill, contentment, efficiency of Employees
FRINGE BENEFITS NOT SUBJECT TO FBT – The term “Rank and File Employees” shall mean all employees who are holding neither managerial nor supervisory position as defined in the Labor Code In the case of rank and file employees, fringe benefits other than those excluded from gross income under the Tax Code and other special laws, are taxable under the individual normal tax rate.
TAXABLE FRINGE BENEFITS HOUSING FRINGE BENEFITS
1. LEASE of residential property
MONETARY VALUE
50 % x rental payments
2. ASSIGNMENT of residential property (5% x FMV or ZV whichever is higher) x 50 % 3. Purchase of residential property on INSTALLMENT
(5% x AC) x 50 %
4. Purchase of Residential property ownership transferred to employee
FMV OR ZV whichever is higher
Non taxable Housing Fringe Benefit 1. Privilege of Armed Forces of the Philippines 2. Housing facility located within 50 meters from business premises 3. Temporary housing = 3 months or less
TAXABLE FRINGE BENEFITS MOTOR VEHICLE FRINGE BENEFITS
MONETARY VALUE
1. Er LEASES and maintains fleet of cars 50 % x rental payments 2. Er OWNS and maintains fleet of cars
(AC/5) x 50%
3. Purchase by INSTALLMENT; ownership=ee; exclusive of interest
(AC/5)
4. Purchase = ownership transferred to employee
AC
5. Cash is given= ownership = ee
Cash received
6. Er shoulders certain amount
Amount shouldered
TAXABLE FRINGE BENEFITS Yacht- subject to FBTx, Monetary Value = ( AC / 20 yrs) Aircraft- eg., helicopter and airplane = considered for business use, therefore, not subject to FBTx
TAXABLE FRINGE BENEFITS EXPENSE ACCOUNTS ; To be taxable a. Expenses paid by employer (receipt should not be in the name of the employer, and should not be in relation to work) b. Personal expenses such as groceries consumed by family is taxable whether or not receipted in the name of the employer.
TAXABLE FRINGE BENEFITS HOUSEHOLD EXPENSES - Expenses of employee for household personnel borne by the employer - E.g. expenses paid for maid, drivers, personal guards, home owener’s association dues
TAXABLE FRINGE BENEFITS INTEREST ON LOANS @ LESS THAN MARKET VALUE MV= (12 % less percentage assumed by employee) x
Principal
TAXABLE FRINGE BENEFITS MEMBERSHIP DUES, FEES, AND OTHER EXPENSES for SOCIAL and ATHLETIC CLUBS Entire amount paid is subject to FBTx
TAXABLE FRINGE BENEFITS EXPENSES OF FOREIGN TRAVEL 1.
Inland travel= food, beverage, and local transportation = NOT subject to FBTx
Lodging= everything in excess of US $ 300/day is TAXABLE 2. AIRFARE Economy and business class= non taxable 1st class = 30 % of the ticket price is subject to FBTx NOTE: the above rules will only apply if there are documented evidences proving that there is work related approved foreign travel. If THERE ARE NO EVIDENCES, then EVERYTHING will be subject to FBTx
TAXABLE FRINGE BENEFITS HOLIDAY AND VACATION EXPENSES - All expenses relating to holiday and vacation expenses are subject to FBTx
TAXABLE FRINGE BENEFITS HOLIDAY AND VACATION EXPENSES - All expenses relating to holiday and vacation expenses are subject to FBTx
TAXABLE FRINGE BENEFITS EDUCATIONAL ASSISTANCE 1. Education of the EMPLOYEE GR: taxable Except: if a. directly connected to the trade and business of the employer AND b. There is a bond (obligation to remain employed for by the employer for an agreed upon period of time)
TAXABLE FRINGE BENEFITS EDUCATIONAL ASSISTANCE 2. Education of the employee’s DEPENDENTS GR: taxable Except: if it is provided though competitive scheme under scholarship program of the Company.
TAXABLE FRINGE BENEFITS INSURANCE BENEFIT Everything that is in excess of what the law requires. e.g., insurance of the employee’s whole family, insurance of his house, etc
THANK YOU
Jmc March 2018
