Answer

True or False - Part 1

1 0

2 0

3 1

4 1
5 1
Answer
True or False - Part 2
1 0
2 0

3 1
4 0
5 0
Answer
Multiple Choice - Theory 1

1A
2D

3C

4C

5C
Answer
Multiple Choice - Theory 2
 1C

2A

3D

4A
5B

Answer the Exercise Drills on the 2nd tab.

 Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
e or False - Part 1
It should be: Benefits for the convenience or advantage of the EMPLOYER are exempt from income tax.

It should be: A MANAGERIAL employee recommends managerial actions. Rank and file are are the peopl
Consultants are experts hired by the company and paid either by the hour, by project or on retainer basis.
employee relationship.
A manager is a person who is responsible for managing an organization. In managing the organization. Th
procedures. Middle and lower level management executes those policies.
Unlike minimum wage earners who are exempt from taxation, Regular employees are subject to regular ta
Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
e or False - Part 2
It should be: Filipinos employed in Philippine embassies are TAXABLE. They are classified as resident citi
It should be: REGULAR compensations are fixed amounts regularly received by the employee every payro
For taxability purposes, employees are classified as regular employees and minimum wage earners. As op
regular employees are taxable employees who may hold any position - managerial, supervisory, or rank an
IT should be: A supplemental compensation….
The word ALL, made the statement false. Directors can be employed or on a consultancy-retainer basis.
Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
iple Choice - Theory 1
a. If the is the CEO, he could be an employee.
b. He is not an employee if he is receiving his pay on retainer basis.
c. Consultants are hired experts to give advice. They are not employees.
d. A talent is hired on a contract basis, is not an employee.
PUJ and taxi drivers are not paid with fixed wages, but they are employees of the PUJ or taxi operator.
Special employee is not a classification of employee. There are only three types of employee as to function
1. Managerial employee
2. Supervisory employee
3. Rank and file employee
As to taxability, employees are classified as:
1. Minimum wage earners
2. Regular employees
A managerial employee is a classification of employee as to function. The is no such thing as special empl

Based on page 334 of the textbook, the answer is letter C. However, the statement therein is not legally ba
R.A. 6727, otherwise known as the "Wage Rationalization Act", which was enacted into law in 1989, (https
6727/) as well as its IRR (implementing rules and regulations) - https://nwpc.dole.gov.ph/wp-content/uploa
the minimum wage to be higher than P5,000/month or P60,000/year.
The Philippine Gazette, by the ICT Division of the Presidential Communications Operations Office (PCOO)
https://www.officialgazette.gov.ph/featured/how-is-minimum-wage-determined/. This article, supports the p
the minimum wage based on several factors.
Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
iple Choice - Theory 2
 Vacation pay is taxable. The only benefits received by minimum wage earners are the following:
1. Basic minimum wage
2. Holiday pay
3. Overtime pay
4. Night shift differential pay
5. Hazard pay

Supplemental compensation or additional compensation – performance-based pays to an employee with o

a. Overtime pay (except for MWE’s)
b. Hazard pay (except for MWE’s)
c. Night shift differential pay (except for MWE’s)
d. Holiday pay (except for MWE’s)
e. Commissions
f. Fees, including director's fees (if director is an employee)
g. Emoluments (any pay in general, including allowances) and honoraria (additional payments for attendin
h. Taxable retirement and separation pay
i. Value of living quarters or meals – not for the benefit of the employer
j. Gains on exercise of stock options
k. Profit sharing and taxable bonuses
De minimis benefits are exempt from tax. Supplemental compensation are taxable.
Fringe benefits refer to the extra benefit supplementing an employee's salary. These are perks that employ
financial compensation.
Salaries are paid to compensate for the employees' services.
Fees are paid to hired consultants, talents, etc. who are not employees of the company.
Retirement and separation pays are given only after the employee leaves the company.
Generally, it is exempt from tax. It can be taxable to an employee with managerial or supervisory position
and file employee, it can also be subject to tax but ONLY IF the limitations set by law along with the 13th m
speaking, it is indeed exempt from tax.
Salaries and wages are regular compensations, not a benefits.

wer the Exercise Drills on the 2nd tab.

EXPLANATION IS NOT NECESSARY FOR THIS PART ONLY
Exercise Drill 1 ED2 Limit
1 DM DM 1 62.50
2 SC SC 2 4,000.00
3 DM DM 3 250.00
4 DM DM 4 0.00
5 OB OB 5 10,000.00
6 RC RC 6 6,000.00
7 DM DM 7 300.00
8 OB OB 8 0.00*
9 OB OB 9 5,000.00
10 DM DM 10 2,000.00
11 DM DM * must be non-cash to be exempt
12 EB EB ** This pertains to the total anniversary and Christma
13 OB FB
14 RC RC
15 SC SC Exercise Drill 5
16 OB FB 1 1,420,000.00
17 SC SC 2 1,408,000.00
18 SC SC #2 - 13th month pay do not exceed P90,000
19 EB EB
20 RC* RC* Exercise Drill 6
21 OB FB 1 48,000.00
22 DM-OB for excess DM-FB for excess 2 97,000.00
23 EB EB 13th month pay do not exceed P90,000 - exe
24 EB EB
25 SC** SC**

* Integrated to the baisc pay of the employee and is not separately paid for.
** 13th month pay and other benefits exceeding P90,000 is also considered a supplemental compensation
 Limit Excess
per day 5,925.00
per annum 2,000.00
per month 9,000.00
6,000.00
per annum 2,000.00
per annum 2,000.00
per month 2,400.00
10,000.00
per annum 3,000.00
per month 12,000.00
sh to be exempt
o the total anniversary and Christmas gift

-
13,000.00
h pay do not exceed P90,000 - exempt

y do not exceed P90,000 - exempt

a supplemental compensation.
Exercise Drill 3
Basic salary 350,000.00
Less: Employee share to SSS, PHIC, HDMF and union dues 24,000.00
Regular compensation income 326,000.00
Overtime pay 16,000.00
Pro-rated 13th month pay -
Gross taxable compensation income 342,000.00

13th month does not excced P90,000

SSS benefits and retirement pay are exempt

Rank & File

Exercise Drill 4 Employee
13th month pay 60,000.00
Profit sharing (this is supplemental) 0.00
De minimis benefits:
De minimis benefits - within their limits 0.00
Excess de minimis benefits 30,000.00
Other de minimis benefits 10,000.00
Other fringe benefits 25,000.00
Total 13th month pay and other benefits 125,000.00
Less: Exclusion limit 90,000.00
Taxable 13 month pay and other benefits** 35,000.00

* Taxable under fringe benefit tax

** Included in compensation income as supplemental/additional compensation
Managerial/
Supervisory
60,000.00
0.00

0.00
*
*
*
60,000.00
90,000.00
0.00
 Answer Multiple Choice - Problems 1
Multiple Choice - Problems 1 1
1 A -
2 B 330,000.00
3 C 1,069,000.00
4 A 222,000.00 2
5 B 138,800.00
Answer
Multiple Choice - Problems 2
1 1,080,000.00
2 C 56,000.00
3 D 32,000.00
4 C 15,000.00 3
5 29,000.00

Multiple Choice - Problems 2

1
2

8
Multiple Choice - Problems 1
With annual salary of P60,000, Johnny is a minimum wag -
As a minimum wage earner, the overtime pay is exempt.
The 5,000 13th month pay since it did not exceed 90,000.

Gross compensation income 377,000.00

Less: Non-taxable compensation income (77,000.00)
Net Compensation income 300,000.00
Supplemental compensation 30,000.00
Taxable compensation income 330,000.00
The 25,000 13th-month pay and other benefits did not exceed 90,000.

Gross compensation income 1,068,000.00

Less: Non-taxable compensation income (44,000.00)
Net Compensation income 1,024,000.00
Supplemental compensation 45,000.00
Taxable compensation income 1,069,000.00
The 89,000 13th-month pay and other benefits did not exceed 90,000.

13th month pay 20,000.00

x 12 months in 1 year 12.00
Gross compensation income (annual) 240,000.00
Less: Non-taxable compensation income 18,000.00
Taxable compensation income 222,000.00
The 14,000 other benefits + 20,000 13th month pay did not exceed 90,000.

Gross compensation (11,000 x 12 months) 132,000.00

Less: Non-taxable compensation income (5,200.00)
Net Compensation income 126,800.00
Supplemental compensation - overtime pay 12,000.00
Taxable compensation income 138,800.00

Multiple Choice - Problems 2

Gross compensation income
Less: Non-taxable compensation income
Net Compensation income 1,080,000.00
Housing allowance -
13th month pay -
Taxable compensation income 1,080,000.00
The housing allowance + the excess of 5,000 (95-90) in 13th month is subject to fringe benefit tax.
The excess of P5,000 if received by a rank and file employee, is treated as a taxable compensation incom
Night shift differential pay 12,000.00
Hazard pay 12,000.00
Honoraria 8,000.00
Profit sharing 24,000.00
Total Supplemental compensation 56,000.00
The 13th month pay and other benefits did not exceed the P90,000
Fixed and regular RATA are treated as part of regular compensation income (not supplemental) and are su

Honoraria 8,000.00
Profit sharing 24,000.00
Total Supplemental compensation 32,000.00
The hazard pay and differential pay is exempt for a minimum wage earner.

Value of stocks at vesting date 45,000.00

Less: Exercise price of option 30,000.00 13th & OB
Total Supplemental compensation 15,000.00 45,000.00
Total of monthly rice allowances 45,000.00
during the year 24,000.00 2,000.00
Christmas gift 5,000.00 3,000.00
Exempt de minimis benefits 29,000.00 95,000.00

SSS, etc. 21,000.00

13th month and other benefits 90,000.00
Exempt de minimis benefits 29,000.00
Non-taxable compensation income 140,000.00

Commission income 12,000.00

13th month and other benefits in excess of P90,000 5,000.00
Supplemental compensation 17,000.00

Annual compensation 540,000.00

Less: Non-taxable compensation income 21,000.00
Net taxable compensation income 519,000.00
Supplemental compensation 17,000.00
Taxable compensation income 536,000.00
 o fringe benefit tax.
axable compensation income.
ot supplemental) and are subject to creditable withholding taxes.
 Answer
True or False - Part 1
1 0
2 0

3 1
4 1
5 1
Answer
True or False - Part 2
1 1
2 0

3 1

4 1

5 0
Answer
Multiple Choice - Theory 1

1B
2D

3A
4A
5B
Answer
Multiple Choice - Theory 2
1C
2D

3D

4A
5B
Answer the problems on the 2nd tab.
 Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
e or False - Part 1
It should be: the fringe benefit tax is a FINAL withholding tax… the rest of the statement is correct.
Only those managerial or supervisory employees are subject to fringe benefit tax.
Only the fringe benefits given to managerial or supervisory employees MAY BE subject to fringe benefit tax
benefits, which are also fringe benefits are exempt from tax if within the limitations set by law, even if recei
It is a personal expense. If the employer shoulders the cost, it is therefore a perk given by the employer - a
They are, and they are the ONLY employees that are subject to fringe benefit tax.
Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
e or False - Part 2
Yes, it is 20% based on a 5-year life. Depreciation value is computed as 1÷5 = 20% of the value of the mo
No, it is 5% based on a 20-year life. Depreciation value is computed as 1÷20 = 5% of the value of the mov
There is no better measurement of the monetary benefit than the amount of cash paid or would have been
monetary value must be the amount of cash given. For a hybird expenses, the amount of cash paid must b
employer, thus 50%.
If the benefit is in kind or non-cash, the monetary value must amount that would have been paid for the be
is the fair value of the property. The book value is only used if it is higher than the fair value.
When the benefit is given in the form of free use of the employer's property, the monetary value is 50% of t
because the free use is deemed as a hybrid expense.
Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
iple Choice - Theory 1
A. It is a tax on the fringe benefits, not passive incomes
B. Correct.
C. The statement is very broad. It could include the other compensation and benefits of managerials and s
D. It does not apply to ALL employees.
Month pay is compensation, it is not a benefit.
A. Correct
B. Excess de mininis are subject to FBT to a managerial or supervisory employee.
C. It is exempt, not subject to tax.
D. It is exempt, but not deducted because the amount is not included in the gross income.
It is not a compensation income. Also, it does not include the 13th month pay.
Only those managerial or supervisory employees are subject to fringe benefit tax.
Explanation (Do not restate any part of the question/choices. You may also cite the page number in the tex
iple Choice - Theory 2
The use of helicopter is deemed as solely for business use. It is not considered as a fringe benefit. Thus, it
It is imposed on the GROSSED-UP monetary value. The grossed-up monetary value is the monetary value
A. It is due quarterly (only)
B. It is a tax on the fringe benefits, not compensation
C. It is applicable ONLY to managerial and supervisory employees.
D. Correct, because it is a FINAL tax.
A. Correct
B. Fair value is very broad
C. Grossed-up is the basis of the FBTax. The monetary value - the actual value of the benefit is deemed n
D. It is limited only for free use of the property.
Only the housing benefit for 3 months or less can be exempted from fringe benefit tax.
wer the problems on the 2nd tab.
 Answer Multiple Choice - Problems 1
Multiple Choice - Problems 1 1
1 D 25,000
2 B 76,923 2
3 A 15,000
4 D 31,250
5 B 3,500,000
Answer
Multiple Choice - Problems 2
1 D 30,000
2 C 19,000
3 D 10,231 3
4 B 800,000
5 B 266,667 4

Multiple Choice - Problems 3

1 D 21,969 14,646 5
2 C 21,942
3 C 820,000
4 A 122,200 Multiple Choice - Problems 2
5 D 28,000 1

Multiple Choice - Problems 3

1

5
Multiple Choice - Problems 1
MV = higher between zonal or assessed value x 5% x 50% x 1/4

Excess de minimis benefits

Other fringe benefits
Total monetary value of the fringe benefits
÷ Grossed-up rate
Grossed-up monetary value
The de minimis benefits within limits is exempt.
13th month pay and other benefits did not exceed 90,000 are therefore exempt.

MV = rental x 50% x 3

MV = (higher between zonal or assessed value + cost of improvement) x 5% x 50% x 1/4

ZV - 3,500,000 vs. AV - 2,000,000

MV = higher between zonal or acquisition cost

ZV - 3,500,000 vs. AC - 3,000,000

Multiple Choice - Problems 2

MV = cost of all motor vehicles x 20% x 50% x 1/4

Personal meals and groceries

Gasoline for transportation (1/2)
Monetary value
Office supplies is a business expense.
Office electricity, water and telephone bills are business expenses.

Monetary value
÷ Grossed-up rate
Grossed-up monetary value
x Fringe benefit tax rate
Fringe benefit tax

MV = cost of the motor vehicle

Monetary value
÷ Grossed-up rate
Grossed-up monetary value
x Fringe benefit tax rate
Fringe benefit tax

Multiple Choice - Problems 3

MV = rental x 50% x 3
÷ Grossed-up rate
Grossed-up monetary value
x Fringe benefit tax rate
Fringe benefit tax - January to March

MV = rental x 50% x 2
÷ Grossed-up rate
Grossed-up monetary value
x Fringe benefit tax rate
Fringe benefit tax - April and May

Groceries
Tuition fee
Monetary value
÷ Grossed-up rate
Grossed-up monetary value
x Fringe benefit tax rate
Fringe benefit tax - April and May

MV = acquisition cost x 5%

Salaries of household help

Salaries of personal security guard
Personal driver
Annual home owner's association dues
Garbage dues
Quarterly monetary value

Membership dues on golf course

Interest free loan (MV = 12% x amount of loan)
Free vacation
Monetary value
 25,000.00

10,000.00
40,000.00
50,000.00
65%
76,923.08

15,000.00

31,250.00

3,500,000.00

30,000.00

15,000.00
4,000.00
19,000.00

19,000 19,000
65% 75%
29,231 25,333
35% 25%
10,231 6,333

800,000.00

800,000.00
75%
1,066,666.67
25%
266,666.67
 40,800.00
65%
62,769
35%
21,969

27,200.00
65%
41,846
35%
14,646

16,000.00
24,750.00
40,750.00
65%
62,692.31
35%
21,942.31

820,000.00

30,000.00
45,000.00
45,000.00
1,000.00
1,200.00
122,200.00

10,000.00
6,000.00
12,000.00
28,000.00