Fringe Benefits

What is fringe benefit?

1. an employment benefit (as a pension or
a paid holiday) granted by an employer
that has a monetary value but does not
affect basic wage rates
2. something extra (such as vacation time)
that is given by an employer to workers
in addition to their regular pay
3. A collection of various benefits provided
by an employer, which are exempt from
taxation as long as certain conditions
are met. Any employee who receives
taxable fringe benefits will have to
include the fair market value of the
benefit in their taxable income for the
year, which will be subject to tax
withholdings,
and
social
security
benefits payments.
Section 33
Special Treatment of Fringe Benefit.(A) Imposition of Tax.A final tax of thirty-four percent (34%) effective
January 1, 1998; thirty-three percent (33%)
effective January 1, 1999; and thirty-two percent
(32%) effective January 1, 2000 and thereafter,
is hereby imposed on the grossed-up monetary
value of fringe benefit furnished or granted to the
employee (except rank and file employees as
defined herein) by the employer, whether an
individual or a corporation (unless the fringe
benefit is required by the nature of, or necessary
to the trade, business or profession of the
employer, or when the fringe benefit is for the
convenience or advantage of the employer). The
tax herein imposed is payable by the employer
which tax shall be paid in the same manner as
provided for under Section 57 (A) of this Code.
The grossed-up monetary value of the fringe
benefit shall be determined by dividing the
actual monetary value of the fringe benefit by
sixty-six percent (66%) effective January 1,
1998; sixty-seven percent (67%) effective
January 1, 1999; and sixty-eight percent (68%)
effective January 1, 2000 and thereafter:
Provided, however, That fringe benefit furnished
to employees and taxable under Subsections
(B), (C), (D) and (E) of Section 25 shall be taxed
at the applicable rates imposed thereat:
Provided, further, That the grossed -Up value of
the fringe benefit shall be determined by dividing
the actual monetary value of the fringe benefit
by the difference between one hundred percent
(100%) and the applicable rates of income tax

under Subsections (B), (C), (D), and (E) of

Section 25.
(B) Fringe Benefit defined.For purposes of this Section, the term '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 as defined herein) such as,
but not limited to, the following:
(1) Housing;
(2) Expense account;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver
and others;
(5) Interest on loan at less than market rate to
the extent of the difference between the market
rate and 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) Expenses for foreign travel;
(8) Holiday and vacation expenses;
(9) Educational assistance to the employee or
his dependents; and
(10) Life or health insurance and other non-life
insurance premiums or similar amounts in
excess of what the law allows.
(C) Fringe Benefits Not Taxable. - The following
fringe benefits are not taxable under this
Section:
(1) fringe benefits which are authorized and
exempted from tax under special laws;
(2) Contributions of the employer for the benefit
of the employee to retirement, insurance and
hospitalization benefit plans;
(3) Benefits given to the rank and file
employees, whether granted under a collective
bargaining agreement or not; and
(4) De minimis benefits as defined in the rules
and regulations to be promulgated by the
Secretary of Finance, upon recommendation of
the Commissioner.
The Secretary of Finance is hereby authorized
to promulgate, upon recommendation of the
Commissioner, such rules and regulations as
are necessary to carry out efficiently and fairly
the provisions of this Section, taking into
account the peculiar nature and special need of
the trade, business or profession of the
employer.

REVENUE REGULATIONS NO. 03-98

SUBJECT
:
Implementing Section 33 of the National Internal
Revenue Code, as Amended by Republic Act
No. 8424 Relative to the Special Treatment of
Fringe Benefits
TO
:
All Internal
Concerned

The grossed-up monetary value of the fringe

benefit shall be determined by dividing the
monetary value of the fringe benefit by the
following percentages and in accordance with
the following schedule:
Effective January 1, 1998

66%

Effective January 1, 1999

67%

Effective January 1, 2000

68%

Revenue Officers and Others

Pursuant to Section 244, in relation to Section

33 of the National Internal Revenue Code of
1997,
these
Regulations
are
hereby
promulgated to govern the collection at source
of the tax on fringe benefits which have been
furnished, granted or paid by the employer
beginning January 1, 1998.
SEC. 2.33.
SPECIAL TREATMENT OF
FRINGE BENEFITS
(A)
Imposition of Fringe Benefits Tax A
final withholding tax is hereby imposed on the
grossed-up monetary value of fringe benefit
furnished, granted or paid by the employer to the
employee, except rank and file employees as
defined in these Regulations, whether such
employer is an individual, professional
partnership or a corporation, regardless of
whether the corporation is taxable or not, or the
government and its instrumentalities except
when: (1) the fringe benefit is required by the
nature of or necessary to the trade, business or
profession of the employer; or (2) when the
fringe benefit is for the convenience or
advantage of the employer. The fringe benefit
tax shall be imposed at the following rates:
Effective January 1, 1998

34%

Effective January 1, 1999

33%

Effective January 1, 2000

32%

The tax imposed under Sec. 33 of the Code

shall be treated as a final income tax on the
employee which shall be withheld and paid by
the employer on a calendar quarterly basis as
provided under Sec. 57 (A) (Withholding of Final
Tax on certain Incomes) and Sec. 58 A
(Quarterly Returns and Payments of Taxes
Withheld) of the Code.

The grossed-up monetary value of the fringe

benefit represents the whole amount of income
realized by the employee which includes the net
amount of money or net monetary value of
property which has been received plus the
amount of fringe benefit tax thereon otherwise
due from the employee but paid by the employer
for and in behalf of his employee, pursuant to
the provisions of this Section.
Coverage These Regulations shall cover only
those fringe benefits given or furnished to
managerial or supervisory employees and not to
the rank and file.
The term, "RANK AND FILE EMPLOYEES"
means all employees who are holding neither
managerial nor supervisory position. The Labor
Code of the Philippines, as amended, defines
"managerial employee" as 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. cdtai
Moreover, these regulations do not cover those
benefits properly forming part of compensation
income subject to withholding tax on
compensation in accordance with Revenue
Regulations No. 2-98.
Fringe benefits which have been paid prior to
January 1, 1998 shall not be covered by these
Regulations.
Determination of the Amount Subject to the
Fringe Benefit Tax In general, the
computation of the fringe benefits tax would

entail (a) valuation of the benefit granted and (b)

determination of the proportion or percentage of
the benefit which is subject to the fringe benefit
tax. That the Tax Code allows for the cases
where only a portion (i.e. less than 100 per cent)
of the fringe benefit is subject to the fringe
benefit tax is clearly stated in Section 33 (a) of
R.A. 8424 which stipulates that fringe benefits
which are "required by the nature of, or
necessary to the trade, business or profession of
the employer, or when the fringe benefit is for
the convenience or advantage of the employer"
are not subject to the fringe benefit tax. Thus, in
cases where the fringe benefits entail joint
benefits to the employer and employee, the
portion which shall be subject to the fringe
benefits tax and the guidelines for the valuation
of fringe benefits are defined under these rules
and regulations.
Unless otherwise provided in these regulations,
the valuation of fringe benefits shall be as
follows:
(1)
If the fringe benefit is granted in money,
or is directly paid for by the employer, then the
value is the amount granted or paid for.
(2)
If the fringe benefit is granted or
furnished by the employer in property other than
money and ownership is transferred to the
employee, then the value of the fringe benefit
shall be equal to the fair market value of the
property as determined in accordance with Sec.
6 (E) of the Code (Authority of the
Commissioner to Prescribe Real Property
Values).

regional
operating
headquarters
of
a
multinational company; (2) an alien individual
employed by an offshore banking unit of a
foreign bank established in the Philippines; (3)
an alien individual employed by a foreign service
contractor or by a foreign service subcontractor
engaged in petroleum operations in the
Philippines; and (4) any of their Filipino
individual employees who are employed and
occupying the same position as those occupied
or held by the alien employees. A fringe
benefit tax of fifteen per cent (15%) shall be
imposed on the grossed-up monetary value of
the fringe benefit. The said tax base shall be
computed by dividing the monetary value of the
fringe benefit by eighty-five per cent (85%).
Taxation of fringe benefit received by employees
in special economic zones Fringe benefits
received by employees in special economic
zones, including Clark Special Economic Zone
and Subic Special Economic and Free Trade
Zone, are also covered by these regulations and
subject to the normal rate of fringe benefit tax or
the special rates of 25% or 15% as provided
above.
(B)
Definition of Fringe Benefit In general,
except as otherwise provided under these
regulations, for purposes of this Section, the
term "FRINGE BENEFIT" means any good,
service, or other benefit furnished or granted by
an employer in cash or in kind, in addition to
basic salaries, to an individual employee (except
rank and file employee as defined in these
regulations) such as, but not limited to the
following:

(3)
If the fringe benefit is granted or
furnished by the employer in property other than
money but ownership is not transferred to the
employee, the value of the fringe benefit is equal
to the depreciation value of the property.

(1)

Housing;

(2)

Expense account;

(3)

Vehicle of any kind;

Taxation of fringe benefit received by a nonresident alien individual who is not engaged in
trade or business in the Philippines A fringe
benefit tax of twenty-five percent (25%) shall be
imposed on the grossed-up monetary value of
the fringe benefit. The said tax base shall be
computed by dividing the monetary value of the
fringe benefit by seventy-five per cent (75%).

(4)
Household personnel, such as maid,
driver and others;

Taxation of fringe benefit received by (1) an

alien individual employed by regional or area
headquarters of a multinational company or by

(5)
Interest on loan at less than market rate
to the extent of the difference between the
market rate and 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)

Expenses for foreign travel;

(8)

Holiday and vacation expenses;

(9)
Educational assistance to the employee
or his dependents; and
(10)
Life or health insurance and other nonlife insurance premiums or similar amounts in
excess of what the law allows.
For this purpose, the guidelines for valuation of
specific types of fringe benefits and the
determination of the monetary value of the fringe
benefits are give below. The taxable value shall
be the grossed-up monetary value of the fringe
benefit.
(1)

Housing privilege

(a)
If the employer leases a residential
property for the use of his employee and the
said property is the usual place of residence of
the employee, the value of the benefit shall be
the amount of rental paid thereon by the
employer, as evidenced by the lease contract.
The monetary value of the fringe benefit shall be
fifty per cent (50%) of the value of the benefit.
(b)
If the employer owns a residential
property and the same is assigned for the use of
his employee as his usual place of residence,
the annual value of the benefit shall be five per
cent (5%) of the market value of the land and
improvement, as declared in the Real Property
Tax Declaration Form, or zonal value as
determined by the Commissioner pursuant to
Section 6(E) of the Code (Authority of the
Commissioner to Prescribe Real Property
Values), whichever is higher. The monetary
value of the fringe benefit shall be fifty per cent
(50%) of the value of the benefit. cda
The monetary value of the housing fringe benefit
is equivalent to the following:
MV = [5%(FMV or ZONAL VALUE] X 50%
WHERE:

employee to use the same as his usual place of

residence, the annual value of the benefit shall
be five per cent (5%) of the acquisition cost,
exclusive of interest. The monetary value of
fringe benefit shall be fifty per cent (50%) of the
value of the benefit.
(d)
If the employer purchases a residential
property and transfers ownership thereof in the
name of the employee, the value of the benefit
shall be the employer's acquisition cost or zonal
value as determined by the Commissioner
pursuant to Section 6(E) of the Code (Authority
of the Commissioner to Prescribe Real Property
Values), whichever is higher. The monetary
value of the fringe benefit shall be the entire
value of the benefit.
(e)
If the employer purchases a residential
property and transfers ownership thereof to his
employee for the latter's residential use, at a
price less than the employer's acquisition cost,
the value of the benefit shall be the difference
between the fair market value, as declared in the
Real Property Tax Declaration Form, or zonal
value as determined by the Commissioner
pursuant to Sec. 6(E) of the Code (Authority of
the Commissioner to Prescribe Real Property
Values), whichever is higher, and the cost to the
employee. The monetary value of the fringe
benefit shall be the entire value of the benefit.
(f)
Housing privilege of military officials of
the Armed Forces of the Philippines (AFP)
consisting of officials of the Philippine Army,
Philippine Navy and Philippine Air Force shall
not be treated as taxable fringe benefit in
accordance with the existing doctrine that the
State shall provide its soldiers with necessary
quarters which are within or accessible from the
military camp so that they can be readily on call
to meet the exigencies of their military service.
(g)
A housing unit which is situated inside or
adjacent to the premises of a business or factory
shall not be considered as a taxable fringe
benefit. A housing unit is considered adjacent to
the premises of the business if it is located
within the maximum of fifty (50) meters from the
perimeter of the business premises.

MV = MONETARY VALUE
FMV = FAIR MARKET VALUE
(c)
If the employer purchases a residential
property on installment basis and allows his

(h)
Temporary housing for an employee who
stays in a housing unit for three (3) months or
less shall not be considered a taxable fringe
benefit.

(2)

Expense account

(a)
In general, expenses incurred by the
employee but which are paid by his employer
shall be treated as taxable fringe benefits,
except when the expenditures are duly receipted
for and in the name of the employer and the
expenditures do not partake the nature of a
personal expense attributable to the employee.
(b)
Expenses paid for by the employee but
reimbursed by his employer shall be treated as
taxable benefits except only when the
expenditures are duly receipted for and in the
name of the employer and the expenditures do
not partake the nature of a personal expense
attributable to the said employee.
(c)
Personal expenses of the employee (like
purchases of groceries for the personal
consumption of the employee and his family
members) paid for or reimbursed by the
employer to the employee shall be treated as
taxable fringe benefits of the employee whether
or not the same are duly receipted for in the
name of the employer.
(d)
Representation and transportation
allowances which are fixed in amounts and are
regular received by the employees as part of
their monthly compensation income shall not be
treated as taxable fringe benefits but the same
shall be considered as taxable compensation
income subject to the tax imposed under Sec.
24 of the Code.
(3)

partly for the benefit of his employer, unless the

same was subjected to a withholding tax as
compensation
income
under
Revenue
Regulations No. 2-98.
(c)
If the employer purchases the car on
installment basis, the ownership of which is
placed in the name of the employee, the value of
the benefit shall be the acquisition cost exclusive
of interest, divided by five (5) years. The
monetary value of the fringe benefit shall be the
entire value of the benefit regardless of whether
the motor vehicle is used by the employee partly
for his personal purpose and partly for the
benefit of his employer.
(d)
If the employer shoulders a portion of the
amount of the purchase price of a motor vehicle
the ownership of which is placed in the name of
the employee, the value of the benefit shall be
the amount shouldered by the employer. The
monetary value of the fringe benefit shall be the
entire value of the benefit regardless of whether
the motor vehicle is used by the employee partly
for his personal purpose and partly for the
benefit of his employer.
(e)
If the employer owns and maintains a
fleet of motor vehicles for the use of the
business and the employees, the value of the
benefit shall be the acquisition cost of all the
motor vehicles not normally used for sales,
freight, delivery service and other non-personal
used divided by five (5) years. The monetary
value of the fringe benefit shall be fifty per cent
(50%) of the value of the benefit.

Motor vehicle of any kind

(a)
If the employer purchases the motor
vehicle in the name of the employee, the value
of the benefit is the acquisition cost thereof. The
monetary value of the fringe benefit shall be the
entire value of the benefit, regardless of whether
the motor vehicle is used by the employee partly
for his personal purpose and partly for the
benefit of his employer.

The monetary value of the motor vehicle fringe

benefit is equivalent to the following:
MV = [(A)/5] X 50%
where:
MV = Monetary value
A = acquisition cost

(b)
If the employer provides the employee
with cash for the purchase of a motor vehicle,
the ownership of which is placed in the name of
the employee, the value of the benefits shall be
the amount of cash received by the employee.
The monetary value of the fringe benefit shall be
the entire value of the benefit regardless of
whether the motor vehicle is used by the
employee partly for his personal purpose and

(f)
If the employer leases and maintains a
fleet of motor vehicles for the use of the
business and the employees, the value of the
benefit shall be the amount of rental payments
for motor vehicles not normally used for sales,
freight, delivery, service and other non-personal
use. The monetary value of the fringe benefit

shall be fifty per cent (50%) of the value of the

benefit.
(g)
The use of aircraft (including helicopters)
owned and maintained by the employer shall be
treated as business use and not be subject to
the fringe benefits tax.
(h)
The use of yacht whether owned and
maintained or leased by the employer shall be
treated as taxable fringe benefit. The value of
the benefit shall be measured based on the
depreciation of a yacht at an estimated useful
life of 20 years.
(4)
Household expenses Expenses of the
employee which are borne by the employer for
household personnel, such as salaries of
household help, personal driver of the
employee, or other similar personal expenses
(like payment for homeowners association dues,
garbage dues, etc.) shall be treated as taxable
fringe benefits.
(5)

Interest on loan at less than market rate

(a)
If the employer lends money to his
employee free of interest or at a rate lower than
twelve per cent (12%), such interest foregone by
the employer or the difference of the interest
assumed by the employee and the rate of twelve
per cent (12%) shall be treated as a taxable
fringe benefit.
(b)
The benchmark interest rate of twelve
per cent (12%) shall remain in effect until
revised by a subsequent regulation.
(c)
This regulation shall apply to installment
payments or loans with interest rate lower than
twelve per cent (12%) starting January 1, 1998.
(6)
Membership fees, dues, and other
expenses borne by the employer for his
employee, in social and athletic clubs or other
similar organizations. These expenditures
shall be treated as taxable fringe benefits of the
employee in full.
(7)

Expenses for foreign travel

(a)
Reasonable business expenses which
are paid for by the employer for the foreign
travel of his employee for the purpose of
attending business meetings or conventions
shall not be treated as taxable fringe benefits. In

this instance, inland travel expenses (such as

expenses for food, beverages and local
transportation) except lodging cost in a hotel (or
similar establishments) amounting to an average
of US$300.00 or less per day, shall not be
subject to a fringe benefit tax. The expenses
should be supported by documents proving the
actual occurrences of the meetings or
conventions.
The cost of economy and business class
airplane ticket shall not be subject to a fringe
benefit tax. However, 30 percent of the cost of
first class airplane ticket shall be subject to a
fringe benefit tax.
(b)
In the absence of documentary evidence
showing that the employee's travel abroad was
in connection with business meetings or
conventions, the entire cost of the ticket,
including cost of hotel accommodations and
other expenses incident thereto shouldered by
the employer, shall be treated as taxable fringe
benefits. The business meetings shall be
evidenced by official communications from
business associates abroad indicating the
purpose of the meetings. Business conventions
shall
be
evidenced
by
official
invitations/communications from the host
organization or entity abroad. Otherwise, the
entire cost thereof shouldered by the employer
shall be treated as taxable fringe benefits of the
employee.
(c)
Travelling expenses which are paid by
the employer for the travel of the family
members of the employee shall be treated as
taxable fringe benefits of the employee.
(8)
Holiday and vacation expenses
Holiday and vacation expenses of the employee
borne by his employer shall be treated as
taxable fringe benefits.
(9)
Educational assistance to the employee
or his dependents
(a)
The cost of the educational assistance to
the employee which are borne by the employer
shall, in general, be treated as taxable fringe
benefit. However, a scholarship grant to the
employee by the employer shall not be treated
as taxable fringe benefit if the education or study
involved is directly connected with the
employer's trade, business or profession, and
there is a written contract between them that the

employee is under obligation to remain in the

employ of the employer for period of time that
they have mutually agreed upon. In this case,
the expenditure shall be treated as incurred for
the convenience and furtherance of the
employer's trade or business.
(b)
The cost of educational assistance
extended by an employer to the dependents of
an employee shall be treated as taxable fringe
benefits of the employee unless the assistance
was provided through a competitive scheme
under the scholarship program of the company.
(10)
Life or health insurance and other nonlife insurance premiums or similar amounts in
excess of what the law allows The cost of life
or health insurance and other non-life insurance
premiums borne by the employer for his
employee shall be treated as taxable fringe
benefit, except the following: (a) contributions of
the employer for the benefit of the employee,
pursuant to the provisions of existing law, such
as under the Social Security System (SSS),
(R.A. No. 8282, as amended) or under the
Government Service Insurance System (GSIS)
(R.A. No. 8291), or similar contributions arising
from the provisions of any other existing law;
and (b) the cost of premiums borne by the
employer for the group insurance of his
employees.
(C)
Fringe Benefits Not Subject to Fringe
Benefits Tax In general, the fringe benefits
tax shall not be imposed on the following fringe
benefits:
(1)
Fringe benefits which are authorized and
exempted from income tax under the Code or
under any special law;
(2)
Contributions of the employer for the
benefit of the employee to retirement, insurance
and hospitalization benefit plans;
(3)
Benefits given to the rank and file,
whether granted under a collective bargaining
agreement or not;
(4)
De minimis benefits as defined in these
Regulations;
(5)
If the grant of fringe benefits to the
employee is required by the nature of, or
necessary to the trade, business or profession of
the employer; or

(6)
If the grant of the fringe benefit is for the
convenience of the employer.
The exemption of any fringe benefit from the
fringe benefit tax imposed under this Section
shall not be interpreted to mean exemption from
any other income tax imposed under the Code
except if the same is likewise expressly exempt
from any other income tax imposed under the
Code or under any other existing law. Thus, if
the fringe benefit is exempted from the fringe
benefits tax, the same may, however, still form
part of the employee's gross compensation
income which is subject to income tax, hence,
likewise subject to a withholding tax on
compensation income payment.
The term "DE MINIMIS" benefits which are
exempt from the fringe benefit tax shall, in
general, be limited to facilities or privileges
furnished or offered by an employer 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 such
as the following:
(1)
Monetized unused vacation leave credits
of employees not exceeding ten (10) days
during the year;
(2)
Medical cash allowance to dependents
of employees not exceeding P750 per semester
or P125 per month;
(3)
Rice subsidy of P350 per month granted
by an employer to his employees;
(4)
Uniforms given to employees by the
employer;
(5)
Medical benefits given to the employees
by the employer;
(6)

Laundry allowance of P150 per month;

(7)
Employee 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 onehalf () month of the basic salary of the
employee receiving the award under an
established written plan which does not

discriminate in favor of highly paid employees;

dctai

Monthly rental
P66,000.00

for

the

residential

(8)
Christmas and major anniversary
celebrations for employees and their guests;

Grossed-up monetary benefit granted

house

(P66,000.00 divided by 66% factor for

(9)
Company picnics and sports
tournaments in the Philippines and are
participated exclusively by employees; and
(10)
Flowers, fruits, books or similar items
given
to
employees
under
special
circumstances, e.g. on account of illness,
marriage, birth of a baby, etc
(D)
Tax Accounting for the Fringe Benefit
Furnished to the Employee and the Fringe
Benefit Tax Due Thereon. As a general rule,
the amount of taxable fringe benefit and the
fringe benefits tax shall constitute allowable
deductions from gross income of the employer.
However, if the basis for computation of the
fringe benefits tax is the depreciation value, the
zonal value as determined by the Commissioner
pursuant to Section 6(E) of the Code or the fair
market value as determined in the current real
property tax declaration of a certain property,
only the actual fringe benefits tax paid shall
constitute a deductible expense for the
employer. The value of the fringe benefit shall
not be deductible and shall be presumed to have
been tacked on or actually claimed as
depreciation expense by the employer.
Provided, however, that if the aforesaid zonal
value or fair market value of the said property is
greater than its cost subject to depreciation, the
excess amount shall be allowed as a deduction
from the employer's gross income as fringe
benefit expense.
Illustrations on fringe benefit furnished or
granted by the employer to an employee (other
than a rank-and-file employee)
(1)
During the year 1998, ABC Corporation
paid for the monthly rental of a residential house
of its branch manager (Mr. Dela Cruz)
amounting to P66,000.00.
In this case, the monthly taxable grossed-up
monetary value of the said fringe benefit
furnished or granted to its branch manager (Mr.
Dela Cruz) shall be P50,000.00, computed as
follows:

calendar year 1998 times 50% taxable portion)

P50,000.00

Fringe benefit
P17,000.00

tax

due

thereon

(34%)

=========
ABC Corporation shall take up in its books of
accounts the P66,000.00 fringe benefit furnished
to Mr. Dela Cruz, under account title "Fringe
Benefit Expense" and the amount of 17,000.00
under the account title "Fringe Benefit Tax
Expense". The aforesaid amounts shall be fully
allowed as deductions from the gross income of
ABC Corporation and shall be taken up in the
said employer's books of accounts as follows:
Debit: Fringe Benefit Expense

P66,000

Debit: Fringe Benefit Tax Expense

P17,000

Credit: Cash

P83,000

To record fringe benefit expense and fringe

benefit tax paid on rental of the residential
property furnished to Mr. Dela Cruz for his
residential use. (Note: If the fringe benefit
expense of P66,000.00 has already accrued but
not yet paid, use the account title "fringe benefit
payable". If the fringe benefit tax has already
accrued but not yet paid, use the account title
"fringe benefit tax payable").
(2)
XYZ Corporation owns a condominium
unit. During the year 1998, the said corporation
furnished and granted the said property for the
residential use of its Assistant Vice-President.
The fair market value of the said property as
determined by the Commissioner pursuant to
Section
6(E)
of
the
Code
amounts
P10,000,000.00 while its fair market value as
shown in its current Real Property Tax
Declaration amounts to P8,000,000.00. In this
case, the higher fair market value of
P10,000,000.00 as determined
by the
Commissioner shall be used in computing the

monetary of the fringe benefit so furnished or

granted to said employee and the fringe benefit
tax due thereon shall be computed as follows:

income as fringe benefit expense. Thus, if the

remaining estimated useful life thereof during
the year 1998 is fifteen (15) years, its monthly
amortization shall be computed as follows:

Monthly rental value of the property

Monthly amortization (P3,000,000.00 divided by
(P10,000,000 times 5% thereof times 50%
15 years divided by 12 months)
divided by 12 months)

P16,666.67

P20,833.33

Grossed-up monetary value thereof as fringe

In this case, XYZ Corporation shall take up the

foregoing in its books of accounts as follows:

benefit (P20,833.33 divided by 66% factor for

Debit: Fringe benefit expense

calendar year 1998) P31,565.66

Debit: Fringe benefit tax

Fringe Benefit
P10,732.32

tax

due

thereon

(34%)

=========

Credit: Cash/Fringe
P10,732.32

In general, under this illustration, the XYZ

Corporation shall not further claim deduction for
allowing its Assistant Vice-President the use of
its residential property since the cost for the use
thereof has already been recovered as
deduction from its gross income under
"Depreciation Expense". However, since the
fringe benefit tax in the amount of P10,732.32,
assumed and paid by XYZ corporation has not
as yet been recovered by way of deduction from
gross income, the same shall be allowed as a
deduction from its gross income. XYZ
Corporation shall take up the foregoing in its
books of accounts, as follows:
Debit: Fringe Benefit Tax Expense
Credit: Cash/Fringe
P10,732.32

Credit:
Income
P16,666.67

Benefit

P10,732.32

Tax

Payable

To record fringe benefit tax expense for the

residential property furnished to employees.
However, if the cost of the aforesaid
condominium unit subject to depreciation
allowance (example: its acquisition cost is only
P7,000,000.00) is lesser that its fair market
value as determined by the Commissioner (i.e.
P10,000,000.00), the excess amount (i.e.
P3,000,000.00) shall be amortized throughout
the remaining estimated useful life of the
residential property used in computing the said
employer's depreciation expense and allowed as
a deduction from the said employer's gross

P16,666.67

P10,732.32

constructively

benefit

tax

realized

payable

To record fringe benefit and fringe benefit tax

expenses and income constructively realized
from the use of company-owned residential
property furnished to employees.
REPEALING CLAUSE All existing rules and
regulations or parts thereof which are
inconsistent with the provisions of these
regulations are hereby revoked. LibLex
EFFECTIVITY These regulations shall take
effect on fringe benefits furnished, granted or
paid beginning January 1, 1998.
TRANSITORY PROVISIONS No penalty
shall be imposed for late payment of the fringe
benefit tax for the first quarter ending March
1998: Provided, however, that the withholding
tax return for the first quarter shall be filed and
the tax is paid not later than July 25, 1998.