FRINGE BENEFIT TAX!!!!
fringe benefit tax
● proposed to enhance the progressivity of the income tax & to broaden the tax base
○ its bc the only forms of employee income that were effectively taxed were those which were given in cash. this was bc an income tax was automatically withheld
& collected at source by the govt.
○ additional compensation which was given in the forms of perks and other non-cash benefits were untaxed, and this give rise to inequity in the distribution of the
tax burden
○ and these untaxed perks became a popular means of tax avoidance
○ meaning naisasama sa expenses ng business, tapos nababawasan tax
compensation
● monetary payment given to an individual in exchange for their services
● salaries, wages, emoluments & honoraria, allowances, commissions, etc.
○ ALL CASH INVOLVED
fringe benefit
● any goods, service, or other benefits furnished or granted by an employer in cash or in kind OTHER THAN THE BASIC COMPENSATION BY AN AN EMPLOYER TO AN
INDIVIDUAL EMPLOYEE (except rank-and-file employee)
● may be property, services, cash or cash equivalent to supplement a stated pay for the performance of services
● fringe benefits subject to FBT cover only those fringe benefits given or furnished to a managerial or supervisiory employee
tax treatment of fringe benefits
fringe benefits given to: part of taxable compensation subject to basic tax & cwt on subject to FBT
compensation
rank & file yes yes no
supervisory/managerial no no YES
● taxable compensation - refers to all forms of compensation income which are subject yo graduated tax rate or basic income tax
● FBs given to managerial & supervisory employees is subject to FBT, a final withholding tax (FWT), not the graduated tax rate for compensation income
managerial employee
● one who is vested with powers of prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay off, recall discharge? assign or
discipline employees
○ all employees not falling within this definitoon are considered rank-and-file employees
nature of a fringe benefit tax
● the fbt is a final tax imposed on the employee withheld by the employer, computed at 35% on the grossed up monetary value (GUMV) of the fringe benefit granted by
the employer to an employee who holds a managerial position
● being a final tax, the fbt is collected or withheld at source by the employer
○ meaning, at the first firm’s level rather than at taxpayer’s level to facilitate tax administration
● it is effective regardless of whether the employer is an individual, professional partnership, or a corporation, the government or its instrumentalities
● shall be withheld and remitted by the employer to the BIR not later than the last day of the month following the close of the quarter which withholding was made
items of fringe benefits subject to tax
. housing
. expense account
. vehicle of any kind
. household personnel (maid, driver, etc.)
. interest on loan at less than market rate to the extent of the difference between the market rate & actual rate granted
. membership fees, dues, and other expense borne by the employer for the employee in social and athletic clubs and similar organizations
. expenses for foreign travel
. holiday & vacation expenses - vacation over 10 days for private employees is subject to FBT, however it is exempt for government employees regardless of the number
of days
. educational assistance to the employee or his dependents
. life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows
tax exempt fringe benefits
. contributions for gsis and sss
. if the fb is required by the nature of, or necessary to the trade, business, or profession of the employer
. de minimis benefits
. if the grant of benefits is for the convenience or advantage of the employer
computation of fringe benefit tax
● in general, fbt rate is 35%. however, rate for nra-netb is 25%. the computation. of the fbt is done by:
○ determining the monetary value
○ determining the proportion or percentage (gross monetary factor) of the benefit which is subject to fbt
○ determining the GUMV of the FB by dividing the MV of the GB by the GMV factor; and
○ multiplying the GUMV by the FBT rate
fringe benefit tax base & rate
classification of tax payers CIT, RA, NRAET NRA-NETB
MV Pxx Pxx
divide by GMV factor 65% 75%
GUMV Pxx Pxx
x FBT rate 35% 25%
FBT Pxx Pxx
valuation of fringe benefits
● if granted in money, the value is the amount granted
● if granted in property and ownership is transferred to the employee, the value is the fair market value of the property
● if granted in property but ownership is not transferred to the employee, the value is equal to the depreciation value of the property
de minimis benefits
● facilities and privileges such as entertainment, medical services, or so called “courtesy” discount on purchases
● exempt from withholding tax on compensation and fbt regardless of the position of the employee who received such benefit(s)
. monetized unused vacation leave credits of private emloyees not exceeding 10 days during the year - P90,000 ceiling
. monetized value of vacation and sick leave credits paid to govt officials and employees
. medical cash allowance - 250/ month
. rice subsidy - 2,000/month or 1 sack (50kg)/ month
. uniforms < 6,000/annum
. actual medical assistance < 10,000/annum
. laundry allowance < 300/month
. employee achievement awards < 10,000
. gifts < 5,000 per employee/annum
. daily meal allowance for ot work/graveyard shift < 25% of the basic minimum wage on a per region basis
. benefits by an employee by virtue of a collective bargaining agreement (cba) & productivity incentive scheemes provided that the total AMV received from two (2)
items above combined, do not exceed 10,000 per employee per taxable year
.
