Fringe Benefits Tax

Fringe Benefit
Fringe benefit is any good, service or other benefit furnished or granted in cash or in kind by an employer, whether an individual or a corporation, to an individual employee (except rank and file employees) such as, but not limited to, the following:
a. housing;
b. expense account;
c. vehicle of any kind;
d. household personnel, such as maids, drivers and others;
e. interest on loans at less than market rate to the extent of the difference between the market rate and the 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 amount in excess of what the law allows.

Tax on Fringe Benefit
A final tax of thirty-two percent (32%) is imposed on the grossed-up monetary value of fringe 
benefits furnished or granted to the employee (except rank and file employees) 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).

Notes: The tax on fringe benefit is payable by the employer and shall be subject to final withholding tax.

As implemented by RR 3-98, as amended, fringe benefits granted to individual taxpayers who are enjoying preferential tax treatment are also subject to the fringe benefits tax at the following rates:

(1) nonresident alien individuals not engaged in trade or business in the Philippines - 25%;
(2) aliens employed by regional or area headquarters or by regional operating headquarters of a multinational company, offshore banking units, foreign service contractors or subcontractors - 15%;
(3) fringe benefits granted to employees in special economic zones - 32%, 25% or 15%, as the case may be.

Non-taxable fringe benefits
a. fringe benefits which are authorized and exempted from tax under special laws;
b. contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans;
c. benefits given to the rank and file employees, whether granted under a collective bargaining agreement or not (up to 10,000 pesos per year including other incentives)
d. de minimis benefits.

Valuation of fringe Benefits
a. 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.
b. 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).
c. 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.