Fringe Benefit and

Fringe Benefit Tax

By: Banzuelo, Ann Lorraine N.
 Fringe Benefit
Fringe Benefit Is a special form of benefits you provide your
Tax in the employees on in addition to their salaries and
Philippines wages. It means any good, service or other benefit
furnished or granted in cash or in kind by an
employer-corporate or sole proprietor, to an
individual employees.

It could be a business related
Providing the expense tending to
employees with personally benefit the
such fringe benefits employee like a vehicle to be
used for business meeting
may be based on; and for personal travels, or
purely personal expense
intended to benefit the
-Company policy employee like housing
personnel- house maid or
-Contract with family drivers.
employee
Employer must have to pay
fringe benefit tax in order to be
allowed to claim the amount of
fringe benefit and the amount
of tax paid.
Examples of such benefits are;
• Housing
• Expenses for foreign travel
• Life or health insurance
• Holiday or vacation expenses
• Educational assistance to
employee or his dependents
 Is a tax payable by employers for benefits paid to an
employee (or an employee’s associate) in place of salary or
wages.

Fringe Benefit  Is a final withholding tax on the grossed-up monetary value of

Tax (FBT) the fringe benefit granted by the employer to an employee
who holds a managerial or supervisory position (i.e., except
rank and file employees). FBT is treated as a final income tax
on the employee which shall be withheld and paid by the
employer on a calendar quarterly basis.
 1.) Fringe benefits which are authorized and exempted from
income tax under the Code or under special law.

-This applies to those benefits that may have been existing as of

Benefits that effectivity of fringe benefit tax in the Philippines last January 1998,
and those that may later be legislated.
are not
covered by 2.) Contributions of the employer for the benefit of the
employee to retirement, insurance and hospitalization benefit
Fringe Benefit plans

Tax -This is in relation to the private retirement benefits under a

reasonable private benefit plan and the retirement benefits
provided by the Labor Code of the Philippines. These provisions are
covered by another set of rules for taxation so the fringe benefit
does not apply.
 3.) Benefits given to the rank and file, whether granted under a
collective bargaining agreement or not.

Benefits that -If the recipient employee is a rank-and-file employee, benefit is not
subject to fringe benefit tax, but only to withholding tax
are not compensation. It is logical because rank-and-file employees are the
least possible recipients.
covered by 4.) Benefits granted to employee as required by the nature of or
Fringe Benefit necessary to the trade, business or profession of the employer

Tax -benefits that are required by the nature of business, or necessary to

the conduct of trade or business is not taxable because they tend to
work for the business and not for the managerial or supervisory
employee.
 5.) Benefits granted for the convenience of the employer

-refers to a benefit provided by the employee for the employee

Benefits that but which would be more beneficial to the employer than the
employee. As such, they are not considered as taxable.
are not
covered by 6.) “De Minimis” benefit
Fringe Benefit
Tax

“De Minimis”
Benefit
These are benefits which are
exempted from fringe
benefit tax shall, in general
be limited to facilities or
privileges furnished or
offered by an employer to
his employee that are
relatively small value. Merely
as a means of promoting
health, goodwill,
contentment or efficiency of
his employees.
“De Minimis” Benefits by Revenue Regulation (RR) 5-2011
a) Monetized unused vacation leave credits of private employees not exceeding
10 days during the year
b) Monetized value of vacation and sick leave credits paid to government
officials and employees
c) Medical cash allowance to dependents of employees not exceeding 750.00
php per employee per semester or 125 per month.
d) Rice subsidy of 1500.00 php or (1) sack of 50 kg rice per month amounting to
not more than 1500.00 php
e) Uniform and clothing allowances not exceeding 4000 per annum
f) Actual medical assistance
g) Laundry allowance not exceeding 300 php per month
h) Employees achievement awards
i) Gifts given during Christmas and major anniversary celebrations not
exceeding 5000 php per employee per annum
j) Daily meal allowance for overtime work and night/graveyard shift not
exceeding 25% of the basic minimum wage on per region basis.
  Fringe benefit provided to
managerial and supervisory
employees are subject to
32% fringe benefit and the
employer will withhold and  For special managerial or
pay as an employer. It supervisory employees not
covered by the 5-32% income
means that employee is no
Taxability of longer liable for fringe
tax rules, the FBT rates would
vary depending on house
Fringe Benefit benefit tax and in case of
non payment, the BIR will
they are taxes.

run after the employer and

not his managerial or
supervisory employees.

How the
Fringe Benefit
tax is
computed
( Final withholding tax on fringe
benefit shall be computed
based on taxable grossed up
monetary value multiplied by
the applicable tax rate.)
1.) The grossed-up monetary value
It shall be determined by dividing the monetary value of the fringe benefit
as provided for in RR No. 3-98 (as amended by RR 5-2011) by the
percentage divisor in accordance with the ff. schedule:
 In general, for the citizen, resident, alien and non resident alien engaged
in trade or business in the Philippines (68%)
 For non-resident alien not engaged in trade or business in the Philippines
(75%)
 For alien or Filipino individuals employed by Foreign Petroleum Service
Contractors/ Subcontractors, Offshore Banking Units and Regional or
Area Headquarters and Regional Operating Headquarters of
Multinational Companies occupying executive/ managerial and technical
positions. (85%)
2.) Applicable Tax Rates
  Problem:
Sample VQA Company (domestic company) granted Mr. Santos
computation (Filipino Branch Manager employee), in addition to his
basic salaries, Php 4,000 cash per quarter for his personal
of Fringe membership fees to Astro Gym. How much is the Fringe
Benefit Tax Benefit Tax that VQA Company should withhold and
remit to BIR per quarter?
 Given:
Monetary Value of Fringe Benefit: Php 4,000
Percentage divisor applicable: 68%
Fringe Benefit tax rate: 32%

Computation Solution:
FBT = (Monetary value of Fringe benefit/Percentage divisor) x FBT
rate
FBT = (php 4000/68%) x 32%
FBT = Php 5,882.35 x 32%
FBT = Php 1,882.35
  BIR Form used in Fringe Benefit Tax (FBT)
BIR Form No. 1603- Quarterly Remittance Return of Financial Taxes
Withheld on Fringe Benefit paid to employees other than Rank and
How to file File.
Fringe Benefit • Who are required to file?
Tax Return Every withholding agent/payor who either an individual or non
individual required to deduct and withhold taxes on fringe benefit
furnished to employees other than rank and file employees subject
to Final withholding tax.
  Deadline
Filling and Payment Via EEPS. On or before the fifteenth (15th) day
of the month following the end of the calendar quarter in which the
How to file fringe benefit were granted to the recipient.
Fringe Benefit • Manual Filling and Payment
Tax Return On or before the tenth (10th) day of the month following the end of
the calendar quarter in which the fringe benefit were granted to
the recipient.
 QUIZ
Fringe Benefit and Fringe Benefit Tax
 IDENTIFICATION

1. special form of benefits you provide your employees on in addition to their

salaries and wages.

2. a final withholding tax on the grossed-up monetary value of the fringe benefit
granted by the employer to an employee who holds a managerial or supervisory
position

3. Benefits which are exempted from fringe benefit tax that are offered by the
employer to the employee with relatively small value.
 TRUE OR FALSE

4. Rank-in-file employees is subject to fringe benefit tax, but only to withholding tax
compensation.

5. Providing employees with such fringe benefits may be based on Company policy and
Contract with employee

6. Fringe Benefit Tax is computed at the grossed-up monetary value

7. Fringe Benefit Tax is a tax payable by employers for benefits paid to an employee (or
an employee’s associate) in place of salary or wages.
8. Not every withholding agent/payor are required to file for fringe benefit tax return.

9. The deadline of the filling of the FBT is on or before the fifteenth (15th) day of the
month following the end of the calendar quarter in which the fringe benefit were granted
to the recipient.

10. The manual filling and payment of FBT is on or before the fifth (5th) day of the month
following the end of the calendar quarter in which the fringe benefit were granted to the
recipient.
 Answers:

1. Fringe Benefit
2. Fringe Benefit Tax
3. De Minimis Benefit
4. False
5. True
6. True
7. True
8. False
9. True
10. False