FRINGE BENEFIT TAX (FBT)
FBT is a final withholding tax imposed on the grossed-up monetary value
of the fringe benefit furnished, granted or paid by the employer to managerial or
supervisory employees, whether such employer is an individual , professional
partnership or corporation, regardless of whether the corporation is taxable or
not, or the government and its instrumentalities. (sec. 33, RA 8424, RR No. 3-98)
The term “Fringe Benefit” means any goods, services, or other benefits
furnished or grabted by an employer in cash or in kind, in addition to basic
salaries, to an individual employee (except rank and file employee) such as but
not limited to:
1.
2.
3.
4.
5.
Housing
Expense account
Vehicle of any kind
Household personnel, such as maid, driver and others
Interest on loan at less than market rate to the extent of the
difference between the market rate and the actual rate granted
6. Membership fees, dues and other expenses borne by the employer
for the employee in social and athletic clubs or other similar
organizations
7. Holiday and vacation expenses
8. Educational assistance to the employee or his dependents
9. Life or health insurance and other non-life insurance premiums or
similar amounts in excess of what the law allows
10. Expenses for foreign travel
The Following are Fringe Benefits NOT subject to FBT:
1. Fringe benefits given to rank and file employees (not subject to FBT but
subject to basic income tax)
2. Housing benefits/privilege:
 Of military officials of the Armed Forces of the Philippines (AFP).
 Which is situated inside or adjacent (within 50 meters from the
perimeter of the business premises) to the premises of a business
factory.
 Which are “temporary” for an employee or for a temporary housing
unit of 3 months or less
3. Expenses incurred by the employee which are paid by the employer and
expenses paid for by the employee but reimbursed by his employer,
provided:
 The expenditures are duly receipted for and in the name of the
employer
 It does not partake the nature of a personal expense attributable to
the employee
4. Allowances subject to liquidation (tax exempt allowances)


Allowances not subject to liquidation are taxable
Representation and transportation allowances which are fixed in
amounts and are regularly received by the employees as part of
their monthly compensation (exempt from FBT but subject to basic
income tax)
5. Reasonable business travel expenses:
 Inland travel expenses (such as expenses for food, beverages and
local transportation) during foreign travel.
 Lodging cost in a hotel (or similar establishments) amounting to an
average of 300USD or less per day during foreign travel

Cost of economy and business class airplane ticket for foreign travel
70% of the cost of first class airplane ticket for foreign travel
o Business travel expenses “within the Philippines” are
generally assumed to be reasonable in amount.
Educational assistance
 To the employee, provided:
o The education or study is directly connected with the
employer’s trade, business or profession; and
o There is a written contract between them that the employer
for a period of time they have mutually agreed upon
 To the dependents of the employee, provided that the assistance
was provided through a competitive scheme under scholarship
program of the company.
Contributions of the employer for the benefit of the employee on the
following:
 Pursuant to the provisions of existing law, such as under SSS and
GSIS
 Similar contributions arising from provisions of any other existing
law
 To retirement, insurance and hospitalization benefit plans
The cost of premiums borne by the employer for the group insurance of
his employees.
Fringe benefits which are/if:
 Authorized and exempted from income tax under the Tax Code or
under any special law
 The fringe benefit is required by the nature of or necessary to the
trade, business or profession of the employer
 For the convenience or advantage of the employer

6.
7.
8.
9.
De Minimis Benefits
The following are de minimis benefits under RR10-2008 as amended by
RA 10963(TRAIN Law);RR 8-2018, RR 11-2-12, RA 10653, RR 1-2015/RR 32015:

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





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Monetized unused vacation leave credits of private employees not
exceeding 10 days during the year and the monetized value of leave
credits paid to government officials and employees.
Medical cash allowance to dependents of employees not exceeding
P1,500 per employee per semester or P250 per month (RR 11-2018;
TRAIN Law)
Rice subsidy of P2,000 or 1 sack of 50kg rice per month amounting to not
more than P2,000 (RR 11-2018;TRAIN Law)
Uniform and clothing allowance not exceeding P6,000 per annum (RR 112018;TRAIN Law)
Actual yearly medical benefits not exceeding P10,000 per annum
Laundry allowance not exceeding P300 per month
Employees achievement awards, e.g., for length of service or safety
achievement, which must be in the form of a tangible personal property
other than cash or gift certificate, with an annual monetary value not
exceeding P10,000 received by the employee under an established
written plan which does not discriminate in favor of highly paid employees
Gifts given during Christmas and major anniversary celebrations not
exceeding P5,000 per employee per annum any excess shall form part of
the “Other Benefits” (RR 10-2008, as amended by RR 5-2011, RR 8-2012
and RR 1-2015)
Daily meal allowance for overtime work and night /graveyard shift not
exceeding 25% of the basic minimum wage
Starting January 1, 2015, benefits received by an employee by virtue of a
collective bargaining agreement (CBA) and productivity incentive
schemes, provided, that the total annual monetary value received from the
2 items combined, do not exceed P10,000per employee per taxable year
(RR 1-2015)
13th Month Pay and Other Benefits
13th month pay and Other Benefits received by officials and employees of
public and private entities not exceeding P90,000 beginning January 1, 2018
under the TRAIN Law (P82,000 from 2015-2017; P30,000 before 2015) are
exempt from income tax and creditable withholding tax on compensation income.
Amount “in excess of P90,000” (as amended) should form part of an individual’s
gross income and would be subject to income tax and applicable creditable
withholding taxes.
“Other Benefits” under RR 2-98 as amended by RR 3-2015
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Christmas bonus
Productivity incentive bonus
Loyalty awards
Gifts in cash or in kind and other benefits of similar nature actually
received by officials and employees of both government and private
offices
Excess of De Minimis over the Ceilings & 13th month pay
De minimis benefits “conforming” to the Tax exempt; excluded in determining
ceiling
the P90,000 ceiling of “other benefits”
“Excess” of the de minimis benefits Included in determining the P90,000
over their respective ceilings
ceiling of “other benefits”
Amount in excess of P90,000 is subject
to basic income tax.
QUIZZERS
1. STATEMENT 1: A fringe benefit is any goods service or other benefits
furnished or granted by an employee in cash or in kind, in addition to basic
salaries to individual employee.
STATEMENT 2; The term compensation under means all remuneration for
services performed by an employee from his employer under an
employer-employee relationship unless specifically excluded by the Code.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
2. In general, the applicable rate in computing fringe benefit tax beginning
January 1, 2018 is:
A. 32%
C. 25%
B. 30%
D. 35%
3. Based on the preceding number, if the employee is a non-resident alien
not engaged in trade or business, the applicable rate is:
A. 32%
C. 25%
B. 30%
D. 35%
4. Which of the following statements is correct?
I.
Fringe benefit is a form of pay which may be in the form of
property, services, cash or cash equivalent to supplement a
stated pay for the performance of services under an employeeemployer relationship.
II. Fringe benefits subject to FBT cover only those fringe benefits
given or furnished to a managerial or a supervisory employee.
III. FBT is a final tax imposed on the employee withheld by the
employer, computed based on the monetary value of the
benefit.
IV. FBT is an income tax. Accordingly, the one liable under the law
to pay the fringe benefit tax is the employee.
V. Fringe benefit subject to FBT shall be included in the income tax
return of the employee.
A. I and II only
C. All of the above
B. I, II and IV only
D. None of the above
5. An employer subject to fringe benefit tax may be a/an
A. Individual
B. General Professional Partnership
C. Corporation
D. All of the above
6. Fringe benefit tax is computed based on:
A. Grossed-up monetary value
B. Monetary value
C. Gross compensation
D. Net compensation
7. STATEMENT 1: The grossing up of fringe benefits was adopted in order
to align the tax treatment of fringe benefits with salaries and wages.
STATEMENT 2: The grossed-up monetary value of the fringe benefit
includes the net amount of money received or the net monetary value of
any property received and the amount of fringe benefit tax.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
8. How much is the allowable deduction from business income of a domestic
corporation which granted and paid P136,000 fringe benefits to its key
officers during 2017 taxable year?
A. 0
C. 136,000
B. 64,000
D. 200,000
9. Using the same data in the immediately preceding number, except that the
taxable year was 2018, how much is the allowable deduction from
business income of the domestic corporation/
A. 0
C. 136,000
B. 64,000
D. 200,000
10. Use the following to answer the next 2 questions:
During 2019, Alpha Corporation gave the following fringe benefits ti its
employees:
 Salaries to rank and file employees
P
1,000,000
 Salaries to managerial employees
1,800,000
 De minimis benefits to rank and file employees
54,400
 De minimis to managerial employees
27,200
 Fringe benefits to rank and file employees
102,000
 Fringe benefits to managerial employees
170,000
How much is the fringe benefit tax?
A. 48,000
C. 91,538
B. 80,000
D. 166,400
11. How much is the total allowable deduction from business income of Alpha
Corporation?
A. 3,153, 600
C. 3,245,138
B. 3,223,600
D. 3,271,600
12. In 2018, Mapagpala Corporation paid for the monthly rental of the
residential house of its branch manager amounting to P204,000.
How much is the fringe benefit expense for the month?
A. P0
C. P102,000
B. P48,000
D. P204,000
13. Based on the data above, the total allowable deduction from business
income of Mapagpala Corporation is
A. P0
C. P258,923
B. P204,000
D. 300,000
14. Delta Corp. bought a condominium unit for P6,000,000. The fair market
value of the property per tax declaration is P6,800,000 while the zonal
value is P6,500,000. It was transferred in the name of Pedro, one of its
executives, for a lower consideration amounting to P5,800,000. How nuch
is the fringe benefit?
A. P0
C. P329,412
B. P538,462
D. P470,588
15. Assuming the selling price is P7,000,000, how much is the fringe benefit
tax?
A. P0
C. P329,412
B. P94,118
D. 470,588
16. Which of the following conditions is/are required in order that expenses
incurred or paid by an employee but which are paid or reimbursed by his
employer will be exempt from income tax?
I.
The expenditures are duly receipted for and in the name of the
employer.
II.
The expenditures are not of a nature of a personal expense
attributable to the employee.
A. I only
C. Any I or II
B. II only
D. Both I and II
17. Which of the following housing benefits is exempt from income tax?
A. Housing unit inside or adjacent (within 50 meters) from the
perimeter of the business premises
B. Temporary housing for a stay in the housing unit for 3 months or
less
C. Housing privilege of military officials of the Armed Forces of the
Philippines.
D. All of the above
18. A domestic corporation provides fixed daily meal allowance to all its
regular employees. The meal allowance is:
A. Exempt from basic income tax
B. Subject to fringe benefit tax if the recipient is a rank and file
employee
C. Subject to FBT if the recipient is a managerial employee
D. Subject to basic income tax
19. Use the following information to answer the next 2 questions:
The following data were taken from Juan (single), holding a managerial
position for 2018 taxable year:
Gross salaries @ P50,000 per month
P
600,000
SSS contributions
12,000
Philhealth contributions
7,200
PAG-IBIG contributions
4,800
Union dues
3,000
Withholding tax on compensation income
73,250
Allowances, not subject to liquidation
100,000
Gasoline allowances, subject to liquidation
17,000
th
13 month pay
50,000
De minimis benefits
12,000
The taxable compensation subject to graduated rate under section 24(A)
of the tax code is:
A. P465,000
C. P573,000
B. P576,000
D. P600,000
20. The fringe benefit tax due is:
A. P0
B. P8,000
C. P53,846
D. P47,059
ANSWER KEY
1.
2.
3.
4.
C
D
C
A



Item III is wrong. FBT is computed based on grossed-up monetary
value, not on the monetary value.
Item IV is wrong. The liable for FBT is the employer, not the
employee.
Item V is wrong. FBT is a final tax. Hence, the related fringe benefit
shall no longer be included in the ITR of the employee. Only
income(s) subject to basic tax are included in the ITR.
5. D

FBT is an income tax, therefore, it is imposed on the employee.
However, FBT is a final tax, hence, the benefits by the employee is
net of tax. The employer shall be constituted as the withholding
agent and shall have the responsibility to remit the tax to the BIR.
Consequently, it s the employer who is liable to pay the tax.

GUMV= P136,000/68%= P200,000

GUMV= P136,000/65%= P209,231

FBT= P170,000*35%= P91,538
6. A
7. C
8. D
9. D
10. C
11. C
 Salaries to rank and file employees
P
1,000,000
 Salaries to managerial employees
1,800,000
 De minimis benefits to rank and file employees
54,400
 De minimis to managerial employees
27,200
 Fringe benefits to rank and file employees
102,000
 Fringe benefits to managerial employees
170,000
 Fringe benefit tax
91, 538
Total allowable OPEX of Alpha Corp.
P
3,245,138
12. D
13. B
 Solution
FBT= [monthly rent*50%/GUMV factor] FBT rate
FBT= [P204,000*50%/65%] 35%
FBT= P54,923
14. B
 Solution
FBT= [6,800,000-5,800,000/65%] 35%= P538,462
15. A
16. D
17. D
18. D
19. C
 Solution
 Gross salaries @ P50,000 per month
 SSS contributions
 Philhealth contributions
 PAG-IBIG contributions
 Union dues
Compensation income subject to basic tax
20. C
FBT= [P100,000/65%] 35%= P53,846
P
P
600,000
(12,000)
(7,200)
(4,800)
(3,000)
573,000