Fringe Benefit Tax

By: Dana Cortez

(ACC 311-2984)
Fringe Benefits
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)

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FRINGE BENEFITS

HEV HIM HEEL

• Housing benefits • Household personnel • Holiday and vacation
expenses
• Expense account • Interest
• Educational assistance
• Vehicles of any kind • Membership fees
• Expense for foreign
travel
• Life or health and
other non-life
insurance premiums
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CHARACTERISTICS

Final tax

Tax upon the fringe benefits of

managerial or supervisory
employees

Paid by the employer

Grossed-up tax

Due quarterly

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PROCEDURES

GU & FBT
MV GMV FBT
rate
Determine the monetary Determine the gross-up Determine the grossed- Determine the fringe
value. rate and fringe benefit up monetary value by benefit tax by multiplying
tax rate applicable. dividing the monetary the FBT rate to the
value by the GUR. GMV.

FBT 35%
GUR 65%
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 FBT rates & GU rates

Employees Employees
Year RC, Year RC,
NRA- NRA-
NRC, RA, SFE SAE NRC, RA, SFE SAE
NETB NETB
NRA-ETB NRA-ETB
Prior 32% Prior 68%
- - - -
2018 2018
2018 25% 2018 75%
and and
35% 15% 15% 65% 85% 85%
thereaf thereaf
ter ter

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EXAMPLE

During 2019, Ms. Ligaya, an area manager of Ligaya Gold Company

received the following additional to his annual salary: Cash worth 220,000
for the educational assistance of his dependent children, cash of 700,000
for motor vehicle in his own name and free living quarters and meals with
an annual value of 250,000.

Compute the fringe benefit tax if Ms. Ligaya is a RC, NRA-NETB and an
alien individual employed by an offshore banking unit.

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Determine the
monetary value (MV)
Educational assistance 220T
Purchase of motor vehicle
700T Free living quarters and meals
250T
TOTAL 1,170T

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Resident Citizen
Employees
Year RC,
NRA-
NRC, RA, SFE SAE
NETB
NRA-ETB
Prior 32%
- -
2018
2018 25%
and
35% 15% 15%
thereaf
ter

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Resident Citizen
GMV (1,170T/65%) 1,800T
FBT rate 35%
FBT 630T

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Nonresident alien-Not
Engaged in trade or
business
Employees
Year RC,
NRA-
NRC, RA, SFE SAE
NETB
NRA-ETB
Prior 32%
- -
2018
2018 25%
and
35% 15% 15%
thereaf
ter

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Nonresident alien-
Not Engaged in trade
or business
GMV (1,170T/75%) 1,560T
FBT rate 25%
FBT 390T

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Alien employed in an
offshore banking units
Employees
Year RC,
NRA-
NRC, RA, SFE SAE
NETB
NRA-ETB
Prior 32%
- -
2018
2018 25%
and
35% 15% 15%
thereaf
ter

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Alien employed in an
offshore banking
units
GMV (1,170T/85%)
1,376,471 FBT rate 15%
FBT 206,471

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Rules on Valuation of
Fringe Benefits

Benefits paid in cash

Benefits paid in kind

Benefits are furnished

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Benefits paid in cash

When the benefit is given in cash or paid in cash, the MV is the amount
paid in cash.

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Benefits paid in kind

When the benefit is given in kind, the MV is the FV or the BV of the thing
given, whichever is higher.

When ownership over the property is transferred to the employee, the MV is

the entire fair value of the property even if the property is partially used in the
business of the employer.

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Benefits that are furnished

When the benefit given is in the form of free use of the employer’s property,
the MV 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:
• 20 yrs for real properties
• 5 yrs for movable properies
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EXAMPLE

A partnership transferred the use of a property with a fair value of

2,000,000 to its supervisor.

The annual depreciation value shall be:

1. If the property is an immovable such as residential unit: 100,000

computed as 2,000,00*5%.

2. If the property is movable such as car or other motor vehicles: 400,000

computed as 2,000,000*20%.

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Special Guidelines: Housing Benefits

MV= 50% of the annual MV= 50% of the annual

MV= 50% of the benefit value of the benefit value of the benefit

Employer leases a Employer owns a The employer purchases

residential property for residential property and a residential property on
the use of his employee assigns the same for the installment basis and
and the said property is use of his employee as his allows his employee to
the usual residence of the usual place of residence, use the same as his
employee. the annual value of the usual place of residence:
benefit is 5% of whichever the annual value is 5% of
is higher of the ZV or AV. the acquisition cost,
exclusive of interest.
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Special Guidelines: Housing Benefits

MV= 100% of the annual

MV= 100% of the benefit value of the benefit

Purchase by the Purchase by employer of

employer of residential property and transfer of title
property and transfer of to employee for less than
ownership is the name of adequate consideration, the
the employee, the value value is (FV or ZV,
of the benefit is whichever is higher) less
whichever is higher of consideration paid by
the acquisition cost or employee.
ZV.
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Special Guidelines: Motor Vehicles of any kind

MV= 100% of the cost of the MV= 100% of the cash MV= 20% of the
motor vehicle benefit acquisition cost

Purchase by employer of Cash benefit to employee Purchase of car on

motor vehicle in the for the purchase of a installment basis by the
name of the employee vehicle, even if the vehicle employer with ownership
regardless of whether the is partly used in the placed in the name of
same is used partially in business of the employer. the employee even if the
the business of the car is used partly for the
employer. employer’s business,
benefit is the acquisition
cost divided by 5 yrs.
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Special Guidelines: Motor Vehicles of any kind

MV= portion shouldered by MV= 50% of the value of MV= 50% of the value of
the employer benefit benefit

Employer shoulders Fleet of motor vehicles Fleet of motor vehicles

portion and is placed in owned for the use of the leased for the use of the
the name of the business and the business and the
employee, even if employees, the value of the employees, the value of
partially used in the benefit is the cost of all the benefit is the rental
business. motor vehicles not used for payments for motor
sales, freight, delivery vehicles not used for
services, and other non- sales, FR, delivery
personal uses divided by 5 services and other non-
yrs. personal use. 23
Special Guidelines: Interest on loan

The interest forgone by the employer representing the difference between

12% and the actual interest charged is a taxable fringe benefit.

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EXAMPLE

Europa Cooperative lent its chief executive officer 1,000,000 at a minimal

3% annual interest rate. The monetary value shall be computed as follows:

Annual monetary value (12%-3%)*1,000,000 90,000

Quarterly monetary value (90,000/4) 22,500

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Tax remedies and administration
By: Dana Cortez
(ACC 311-2984)
ASPECTS OF TAXATION

Legislative Aspect

Administrative Aspect

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TAXPAYER’S REMEDIES

Assessment

Collection
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TAX ASSESSMENT

This refers to the process

of computing and
determining tax liability
of taxpayer based on
prevailing tax rate
Tax delinquency VS Tax
deficiency

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Requisites for a Valid Assessment

Issued by the BIR

Based on findings of fact

and/or law: actual facts

Factual and/or legal bases of

the assessment must be stated
Contain a computation of tax
liabilities
Contain a demand for payment
within the prescribed period

It must be sent to the taxpayer

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Assessment Process

Determination of the amount

due.
Issuance of proper notice to the
taxpayer regarding the amount
tax liability.
Enforcement or demand for
payment simultaneous with the
giving of notice.

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Prescribed Period of
Assessment
Three years from the date of filing
the return
1. If the return was filed before the last
day of filing, the three year period will
start after the last day of filing the
return.

Example:
Return filed : March 1, 2019
Last day of filing : April 15, 2019
Last day of valid ass. : April 15, 2022

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Prescribed Period of
Assessment
Three years from the date of filing
the return
2. If the return was filed after the
mandated period of filing, the three
year period of assessment will start
from the date of filing the return.

Example:
Return filed : April 15, 2019
Last day of filing : June 30, 2019
Last day of valid ass. : June 30, 2022

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Prescribed Period of
Assessment
Ten years from the date of discovery
or omission
1. Failure to file a return
2. Return filed was false or fraudulent with
the intention to evade the tax.

Example:
Return filed : April 15, 2019
Last day of filing : June 30, 2019
Last day of valid ass. : June 30, 2029

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Assessment Procedure

Formal Protest phase of Appeal on tax

assessment phase the assessment assessment
procedure decision

• By mail • Within 30 days • When the

• By personal • Either cover all protest has
delivery the issues or been denied by
only some of revenue officer
the issues of BIR
• All facts and • When BIR
bases of the made no action
protest be within 180 days
stated from
• Required submission of
documents and documents
evidences be
submitted within
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60 days
TAX COLLECTION

This refers to the process

wherein the government
devises effective and
efficient ways and means
to collect taxes.
This is an administrative
aspect o f taxation.

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Remedies for collection
of delinquent taxes
Administrative remedies
1. Distraint of all personal property
2. Levy of real property belonging to
the taxpayer

Judicial remedies
1. Civil action
2. Criminal action

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Other Remedies of Enforcement of forfeiture of
the Government
property
Enforcement of tax lien

Entering into compromise

of tax cases
Requiring the filing of
bonds
Giving of rewards to
qualified tax informers
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Other Remedies of Imposition of surcharges for
the Government
non/late payment
Making arrest, search, seizure

Deportation of aliens who

violated tax laws
Inspection and examination of
records and books of accounts
Use of national tax register

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For cases of financial incapacity

10% of assessed tax 20% of assessed tax 40% of assessed

liability liability tax liability

• Without source of • Dissolved corporation • Has surplus or

income • Non-operating earnings deficit
• Zero or negative company for less resulting in
net worth / non- than 3 yrs impairment in the
operating income • Declared bankrupt / original capital by at
for a period of 3 yrs insolvent least 50%
or more
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Rewards to tax informers

10% based on 10% based on tax 10% based on FMV

revenues, surcharge imposed, including or 1,000,000
imposed or collected, surcharges, and whichever is lower,
for giving of penalties or 1,000,000 for discovery and
voluntary sworn whichever is lower, for seizure of smuggled
information violations of tax code goods

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POWER OF THE COMMISSIONER

1. Make assessments and prescribe additional requirements for tax administration and
enforcement.
2. Interpret tax laws and decide tax cases.
3. Obtain information, summon, examine, and take testimony of person.
4. Delegate powers vested by him by the code to any subordinate officer with rank
equivalent to a division chief of.
5. Suspend business operation of taxpayer.
6. Compromise, abate, and refund or credit taxes.
7. Power to expand its authority to look into a taxpayer’s bank accounts and share obtain
information with the requesting foreign tax.

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Power of the Commissioner that cannot be delegated

1. The power to recommend the promulgation and regulations by the secretary of finance,
and the power to issue rulings of first impression or to reverse, revoke or modify rulings
of BIR.
2. The power to compromise or abate any tax liability.
3. The power to assign or re-assign internal revenue officers to establishments where
articles is subject to excise tax are produced or kept.

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POWER and DUTIES OF BIR

1. Assessment and collection – Tax, fees and charges.

2. Enforcement of all forfeiture, penalties, fines and etc.
3. Execution of judgement in all cases decided in its favor by the court of tax appeals and
Ordinary courts.
4. Administration of supervisory and Police powers conferred or granted to it. To give
effect to and administer the supervisory and Police power conferred to it by the tax
code.
5. To recommend to the secretary of finance all needful rules and regulations for the
effective enforcement of the provision of the tax code.

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AUTHORITY OF REVENUE OFFICER

1. Perform assessment functions pursuant to the letter of authority issued by the revenue
regional director.
2. Examine taxpayers within the jurisdiction of the district in order to collect the correct
amount of tax.
3. Recommend the assessment of any deficiency tax due in the same manner that the
said acts could have been performed by the revenue regional director himself.

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THANK YOU!