Fringe Benefit means any good, service or other benefit furnished or granted in cash or in kind by an
employer to an individual employee (except rank and file employees) such as, but not limited to, the
following:
a.
b.
c.
d.
e.
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 actual rate granted;
f. Membership fees, dues and other expenses borne by the employer for the employee in social
and athletic clubs or other similar organizations;
g. Expenses for foreign travel;
h. Holiday and vacation expenses;
i. Educational assistance to the employee or his dependents; and
j. Life or health insurance and other non-life insurance premiums or similar amounts in excess of
what the law allows.
RULES IN FRINGE BENEFITS
1.) Fringe benefits to rank-and-file employees are not taxable with fringe benefit tax, but instead are
taxable as compensation income subject to normal income tax rate in Section 24(A) of the NIRC, except
for “de minimis benefits” and benefits provided for the convenience of the employer. A rank-and-file
employee is an employee not holding a managerial or a supervisory position.
2.) Fringe benefits to managerial and supervisory employees are taxable with the 35% fringe benefit tax,
which is a final tax and is the subject of this article, except for “de minimis benefits” and benefits provided
for the convenience of the employer. A managerial employee is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees. Supervisory employees are those who, in the interest of
the employer, effectively recommend such managerial actions if the exercise of such authority is not
merely routinary or clerical in nature but requires the use of independent judgment.
CHARACTERISTICS OF FRINGE BENEFIT TAX
1.
2.
3.
4.
Final Tax
Paid by the employer
Grossed-up tax
Due quarterly
FRINGE BENEFIT TAX RATE:
In General, for Citizen, Resident Alien and NonResident Alien Engaged in Trade or Business
Within the Philippines
Non-Resident Alien Not Engaged in Trade or
Business Within the Philippines 75%
35%
25%
COMPUTATION OF TAX:
The final withholding tax on fringe benefit shall be computed based on the taxable grossed-up monetary
value multiplied by the applicable tax rate. The grossed-up monetary value of the fringe benefit shall be
determined by dividing the monetary value of the fringe benefit as provided in Revenue Regulations No.
3-98, as amended, by the percentage divisor in accordance with the following schedule:
In General, for Citizen, Resident Alien and NonResident Alien Engaged in Trade or Business
Within the Philippines
Non-Resident Alien Not Engaged in Trade or
Business Within the Philippines 75%
65%
75%
RULES ON VALUATION OF FRINGE BENEFITS
1. Benefits paid in cash
When benefit is given in cash or paid for in cash, the monetary value is the amount paid for in cash.
Note: The only exception here is when the employer pays for the rent of the residence of the employee.
Monetary value is 50% of the rental payment.
2. Benefits paid in kind
When benefit is given in kind, the monetary value is the fair value of the thing given unless its book
value is higher. Book value is the cost less any provision for depreciation for depreciable properties. s
Simply stated, the monetary value is the fair value or the book value of the thing given, whichever is
higher.
When ownership over the property is transferred to the employee, the monetary value is the entire fair
value of the property even if the property is partially used in the business of the employer.
3. Benefits that are furnished
When the benefit is given in the form of free use of the employer's property, the monetary value is 50%
of the rental value of the property. If the property has no available rental value, the depreciation value is
used.
For purposes of the depreciation value, the presumptive useful lives of the property are:
a. 20 years for real properties.
b. 5 years for movable properties.
Since the fringe benefit tax is paid quarterly, the valuation and reporting of monetary value is also done
quarterly. In case of use of employer properties, the reporting of monetary value ceases from the month
the free use is discontinued.
MONETARY VALUE DETERMINATION:
1. Housing Benefits
Employer leases a residential property, 20,000.00/ month, for the use of his employee as his
usual residence.
Required:
a. Determine the monetary value of the housing benefit.
b. Determine the monetary value if the employer owns the property with zonal value of
3,000,000.00 and market value of 4,000,000.00, and was acquired for 5,000,000.00.
c. Determine the monetary value if the employer purchases a property with zonal value of
3,000,000.00 and market value of 4,000,000.00, and was acquired for 5,000,000.00, on an
installment basis.
d. Determine the monetary value if the title of the property purchased in no. 3 was transferred
to the employee.
2. Expense Account
Expenses that are incurred by the employee but are shouldered or paid by the employer, or
expenses that are incurred and paid by the employee but was reimbursed by the employer.
MONETARY VALUE= Amount paid by the employer
3. Motor vehicle of any kind
a. If transferred in the name of the employee
 If purchased in cash= 100% of the cost of the vehicle
 If purchased on an installment basis= 20% of the acquisition cost
 If only portion of the cost was shouldered by the employer= portion shouldered
b. If was given in cash= 100% of the cash given, except when subjected to withholding tax on
compensation.
4. Household Expenses= amount paid by the employer
5. Interest on Loan less than the market rate
Current market rate= 12%
Monetary value= the difference between 12% and the actual interest charged.
6. Membership fees, dues and other expenses borne by the employer for the employee in social
and athletic clubs or other similar organizations= amount paid by the employer
7. Expenses for Foreign Travel
Reasonable business expenses for foreign travel for business meetings and conventions that are
duly substantiated are exempt; otherwise subject to FBT.
Business meetings= official communication from business associates abroad indicating
the purpose of the meeting.
Business conventions= official invitation or communication from the host organization
or entity abroad.
LIMITATIONS:
a.
b.
c.
d.
Inland travel expenses
Lodging costs= $300/ day
Economy and business class airplane tickets
70% of the cost of first class ticket; 30% is considered de minimis benefit
8. Holiday and Vacation Expenses= amount paid by the employer
9. Educational assistance to the employee or his dependents
Generally taxable except:
a. Education or study is directly connected with the employer’s trade, business or profession
b. There is a written contract that the employee is under obligation to remain at the employ of
the employer for a period of time they mutually agreed upon.
c. When the assistance granted to dependents was provided under a scholarship program of the
company.
10. Life or health insurance and other non-life insurance premiums or similar amounts in excess of
what the law allows
EXEMPT:
a. Contribution of the employer on SSS, GSIS,PHIC and HDMF;
b. Cost of premium of group insurance of employees.
NOTE:
a. Life insurance where the company is the beneficiary is considered business expense
b. Insurance for company assets is considered as business expense