Professional Documents
Culture Documents
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA
Imposed on the grossed- Fringe benefit tax is imposed on the grossed-up monetary value of fringe benefits
up monetary value furnished granted or paid by employer to employees except rank and file employees.
Imposed regardless of Fringe benefit tax is imposed whether the employer is an individual, professional
who the employer partnership or corporation, regardless of whether the corporation is taxable or not, or
the government or its instrumentalities.
Withheld by employer Fringe benefit tax shall be treated as a final tax on the employee, which shall be
withheld and paid by the employer on a calendar quarterly basis.
Tax base and tax rate Monetary value of fringe benefit Pxxx
Divided by 68%
Grossed-up monetary value xxx
Tax rate 32%
Fringe benefit tax Pxxx
Tax base and tax rate for Monetary value of fringe benefit Pxxx
NRA-NETB Divided by 75%
Grossed-up monetary value xxx
Tax rate 25%
Fringe benefit tax Pxxx
Tax base and tax rate for Monetary value of fringe benefit Pxxx
special aliens and their Divided by 85%
Filipino counterparts Grossed-up monetary value xxx
and employees in Tax rate 15%
Special Economic Zone Fringe benefit tax Pxxx
Page | 1
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA
4. DE MINIMIS BENEFITS
Meaning of de minimis De minimis benefits are facilities or privileges furnished or offered by an employer
benefits to his employees that are of relatively small value and are offered or furnished by
the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employees.
5. TAX ACCOUNTING FOR THE FRINGE BENEFIT FURNISHED TO THE EMPLOYEE AND THE FRINGE
BENEFIT TAX DUE THEREON
Employer leases residential property for the Rental paid 50% of the value of the
use of the employee benefits
Employer owns residential property which 5% of the FMV of the land 50% of the value of the
was assigned to an officer for his use as and improvements benefits
residence
Employer purchases residential property on 5% of the acquisition cost 50% of the value of the
the installment basis and allows the exclusive of interest benefits
employee to use the same as his residence
Employer purchases a residential property Employer’s acquisition cost or Entire value of the benefit
and transfers the ownership in the name of FMV, whichever is higher
the employee
Employer purchases a residential property FMV xxx Entire value of the benefit
and transfers ownership to his employee for
Page | 2
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA
a) During the year 2006, ABC Corporation paid for the monthly rental of a residential house of its branch
manager, Mr. J. de la Cruz, amounting to P68,000. Prepare the necessary journal entries.
b) XYZ Corp. owns a condominium unit. During the year 2006, the said corporation furnished and granted
the said property for the residential use of its Assistant Vice President. The fair market value of the
property per BIR amounts to P10,000,000 while its fair market value as shown in its current Real Property
Declaration amounts to P8,000,000. Prepare the necessary journal entries.
c) Using the same data in illustration no. 2) above and assuming that the acquisition cost of the residential
property is P7,000,000 and the remaining useful life is 15 years. Prepare the necessary journal entries.
d) In 2007, Taprolani Corporation purchased a residential house and lot a P2,300,000. The property was
sold to the President of the corporation for P1,980,000. The fair market value per BIR and per Assessor’s
Office were P2,500,000 and P2,607,000 respectively.
e) A house and lot were owned by Bonafe Laundry Corporation. The ownership of the said house and lot
was transferred to its President, Mars Bonafe, in 2007. The following data were made available:
Cost P5,000,000
Fair market value per BIR 4,500,000
Fair market value per Assessor’s 3,000,000
Office
Employer owns and maintains a fleet of Acquisition cost of all motor 50% of the value of the benefit
motor vehicles for the use of the business vehicles not normally used for
and employees business divided by 5 years
Employer leases and maintains a fleet of Amount of rental payments 50% of the value of the benefit
motor vehicles for the use of the business for motor vehicle not normally
and the employees used for business purposes
Employer purchases the motor vehicle in Acquisition cost Entire value of the benefit
the name of the employee
Employer provides the employee with cash Amount of cash received by Entire value of the benefit
for the purchase of a motor vehicle in the the employee
name of the employee
Employer shoulders a portion of the amount Amount shouldered by Entire value of the benefit
of the purchase price of a motor vehicle in the employer
the name of the employee
Employer purchases the car on installment Acquisition cost Entire value of the benefit
in the name of the employee exclusive of interest
divided by 5 years
Exercises
1) In 2007, Mata Optical Shop, sole proprietorship, purchased a motor vehicle for the use of its Manager,
Dr. Malachi Mata. It was registered in Dr. Mata’s name. The cost of the vehicle was P400,000. The vehicle
was used partly for the benefit of the company. How much is the fringe benefits tax?
Page | 3
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA
2) Eyes Drop, maker of the best-selling ice cream, owns a fleet of motor vehicles for use of the business
and its employees. One of the motor vehicles costing P450,000 is not used for business purposes, but for
the employees’ personal need. How much is the annual fringe benefits tax?
Exercises
1) In 2004, Race Corporation paid the P50,000 vacation expenses of its President, Ms. Rita Ube to Dayag Rezzort.
2) Kat Lee, an executive of the Race Bank, was granted a loan by the bank. The amount of the loan was
P2,000,000 at 8% interest per annum. The loan was payable in four (4) months. How much is the monthly fringe
benefit tax?
10. FRINGE BENEFITS THAT ARE NOT SUBJECT TO FRINGE BENEFITS TAX
Exercises
1) SB Corporation bought a residential property in installment for the use of its President. The total amount paid by
the corporation was P5,500,000 (inclusive of P500,000 interest).
Question 1 – How much was the value of the fringe benefit?
2 – How much was the monetary value of the fringe benefit?
3 – How much was the grossed-up monetary value of the fringe benefit?
4 – How much was the fringe benefits tax?
Question 1 – How much is the grossed-up monetary value of the fringe benefits given to managers and
supervisors?
2– How much is the monetary value of fringe benefits given to managers and supervisors?
3– How much is the value of the fringe benefits given to rank and file?
4– How much was the total amount of deductions?
3) The following data from the year 2009 of a resident rank and file employee who was four (4) qualified dependent
children are made available:
Salary, net of P10,000 withholding tax, P2,400 SSS contributions, P2,000 Philhealth P206,000
contributions and P1,500 union dues
Page | 4
Accounting Review
TAXATION
401: Fringe Benefits and Fringe Benefits Tax
Prof. SONNIE A. RAMOS, CPA, MBA
---END---
Page | 5