TAXATION OF FRINGE BENEFITS
Download
1 / 72

For PMAP Grand Men Seng Hotel June 26, 2014 Presented by: Susan D. Tusoy, CPA, MPS - PowerPoint PPT Presentation


  • 81 Views
  • Uploaded on

TAXATION OF FRINGE BENEFITS. For PMAP Grand Men Seng Hotel June 26, 2014 Presented by: Susan D. Tusoy, CPA, MPS (powerpoint presentation courtesy of RO Christine Diwata T. Camina). Legal Basis. Sec. 33 of NIRC of 1997 RR 3-98 RR 8-2000 RR 10-2000 RR 5-2008 RR 5-2011 RMC 20-2011.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' For PMAP Grand Men Seng Hotel June 26, 2014 Presented by: Susan D. Tusoy, CPA, MPS' - ura


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

TAXATION OF FRINGE BENEFITS

For PMAP

Grand Men Seng Hotel

June 26, 2014

Presented by:

Susan D. Tusoy, CPA, MPS

(powerpoint presentation courtesy of RO Christine Diwata T. Camina)


Legal basis
Legal Basis

  • Sec. 33 of NIRC of 1997

  • RR 3-98

  • RR 8-2000

  • RR 10-2000

  • RR 5-2008

  • RR 5-2011

  • RMC 20-2011


FRINGE BENEFIT

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, such as but not limited to the ff:


Housing;

Expense Account;

Vehicle of any kind;

Household personnel

Interest on loan at less than market rate

Membership fees, dues and other expenses;

Expenses for foreign travel;

Holiday and vacation expenses;

Educational assistance

Life/ health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.


COVERAGE

All fringe benefits given or furnished to managerial or supervisory employees excluding the rank and file.


NATURE

  • The FBT imposed under Section 33 of the tax code shall be treated as final income tax on the employee that shall be withheld and paid by the employer.


RATE OF TAX AND TAX BASE

  • 32% of the gross-up monetary value of the fringe benefit


GROSS-UP MONETARY VALUE

GMV = MV + FBT

100% = 68%+32%

Therefore:

GMV = MV ÷68%


GENERAL RULE IN THE VALUATION OF FRINGE BENEFITS

a.) If the FB 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 FB is granted by the employer in property and

ownership is transferred to the employee, then the value

of the FB shall be equal to the FMV of the property


GENERAL RULE IN THE VALUATION OF FRINGE BENEFITS

c.) If the FB is granted by the employer is in property but the

ownership is not transferred to the employee, the value of

the FB is equal to the depreciation value of the property.


Steps in computing fbt
STEPS IN COMPUTING FBT

  • Determine the value of the benefit

  • Determine the Monetary Value (MV)

  • Divide the MV by 68% to derive the GMV

  • Multiply the GMV by 32%



Case 1. A – the employer leases residential property for the use of employee.

Value of the benefit - rental paid by the employer

Monetary Value - 50% of the value of the benefit

Tax base - GMV


Illustration Case 1. A the use of employee.

Jupiter Co. leased a residential house for the use of its branch manager. The rent agreed upon under the contract was P 165,000 per month.

Value of the benefit P165,000

Monetary Value (50% of 165,000) 82,500

Tax base/GMV (P82,500 / 68%) P121,324

Monthly FBT (121,324x32%) P 38,824


Accounting entries
ACCOUNTING ENTRIES the use of employee.

If paid:

Dr: Fringe Benefit Expense 165,000

Dr: Fringe Benefit Tax Expense 38,824

Cr: Cash 203,824

If accrued but unpaid:

Dr: Fringe Benefit Expense 165,000

Dr: Fringe Benefit Tax Expense 38,824

Cr: Fringe Benefit Payable 165,000

Cr: Fringe Benefit Tax Payable 38,824


Case 1.B – The employer owns residential property which was assigned to an officer for his use as residence.

Annual value of the benefit - 5% of FMV of the land and improvements as determined by the BIR Com. or the Assessor, whichever is higher.

Monetary Value of the benefit - 50% of the value of the benefit

Tax base - GMV


Illustration Case 1.B1 - property which was assigned to an officer for his use as residence.COST IS HIGHER THAN FMV

Uranus Co. owns a condominium unit which an officer of the company was allowed to use as residence. Cost of the unit was P 12M. The FMV per Zonal is P 10M and the Assessors’s is P 8M.

Monthly Value of FB (5% of P10M/12mos.) P 41,667

Monetary Value (50% of 41,667) P 20,833

GMV ( P 20,833/68%) P 30,637

Monthly FBT P 9,804


Accounting entry
ACCOUNTING ENTRY property which was assigned to an officer for his use as residence.

Case 1.B

Dr: Fringe Benefit Tax Expense 9,804.00

Cr: Cash/Fringe Benefit Tax Payable 9,804.00


Illustration Case 1.B2 - property which was assigned to an officer for his use as residence.COST IS LOWER THAN FMV

Same as Case 1.B.1 but the cost of the unit was only P 7M. The FMV per Zonal is P 10M and the Assessor’s is P 8M. The condominium has a remaining estimated useful life of 15 years.

Base Value for FBT P 10M

Less: Cost 7M

Excess Amount 3M

====

Take Note!: The excess amount shall be amortized throughout the remaining estimated useful life

of the residential property


Monthly amortization property which was assigned to an officer for his use as residence.

(P 3M/15years/12months) P 16,667.00

ACCOUNTING ENTRY:

Dr: Fringe Benefit Expense 16,667.00

Dr: Fringe Benefit Tax Expense 9,804.00

Cr: Income Constructively Realized 16,667.00

Cr: Cash/Fringe Benefit Tax Payable 9,804.00


Case 1.C- The employer purchases residential property on the installment basis and allows the employee to use the same as his residence.

Annual value of FB - 5% of the acquisition cost

exclusive of Interest

MV of the FB - 50% of the value of the benefit

Tax Base - GMV


Illustration Case 1.C the installment basis and allows the employee to use the same as his residence.

PBB Co. purchased real property in installments and allowed Mr. Y an officer to use the same as his residence. Installment contract price was P 2M.

Annual Value of FB (5% of 2M) P 100,000.00

MV (50% of P100T) P 50,000.00

GMV(P50,000/68%) P 73,530.00

Monthly FBT (P 73,530 x 32%/12 mos) P 1,961.00


Case 1.D - The employer purchases a residential property and transfers ownership thereof in the name of the employee.

Value of FB - Employer’s acquisition Cost or FMV(zonal or TD), whichever is higher

MV of the FB - the entire value of the Benefit

Tax Base - GMV


Illustration Case 1.D and transfers ownership thereof in the name of the employee.

Earth Co. purchased a house and lot and transferred title thereto to its president. The acquisition cost was P 1.5M. The zonal value is P 2M, while market value per TD is P 2.5M

Value of FB (per TD the highest) P 2,500,000

MV (entire benefit) P 2,500,000

GMV(P2.5M/68%) P 3,676,471

FBT (P 3,676,471x 32%) P 1,176,471


Case 1.E - 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.

Value of FB - The difference between the FMV of the BIR commissioner or the FMV of the assessor, whichever is higher and the cost to the employee.

MV of the FB - The entire value of the benefit

Tax Base - GMV


Illustration Case 1.E and transfers ownership thereof to his employee for the latterVenus Co. purchased a house and lot at a cost of P 2M. The property was transferred to its president to be used for residential purposes for P 1.5M . Zonal Value is P 2.3M, while the assessor’s value is P 2.5M.FMV of assessor (higher than ZV) P 2,500,000Less: Cost to the employee 1,500,000Value of the benefit 1,000,000 Monetary Value (Entire Value) 1,000,000 GMV (P 1M/68%) 1,470,588FBT (P 3,676,471x 32%) P 470,588


Housing benefits which are not taxable
HOUSING BENEFITS WHICH ARE NOT TAXABLE and transfers ownership thereof to his employee for the latter

a.) Housing privilege of military officials of the AFP consisting of officials of PA, PN and PAF.

b.) A housing unit which is situated inside or

adjacent to the premises of a business or factory.

WITHIN THE MAXIMUM 50 METERS FROM THE

PERIMETER OF THE BUSINESS PREMISES

c.) Temporary housing for an employee who stays in the housing unit for 3 months or less.


2 expense account
2. EXPENSE and transfers ownership thereof to his employee for the latter ACCOUNT


Expenses incurred by the employee which are paid by his employer shall be treated as taxable FB;

Expenses paid for by the employee but reimbursed by his employer shall be treated as taxable FB.

The above expenses are not treated as fringe benefits and therefore not taxable provided:

a.) the expenditures are duly receipted for and in the name of the employer, and

b.) the expenditures are connected with the trade or business of the taxpayer


Personal expenses of the employee paid for or reimbursed by the employer to the employee shall be treated as taxable FB of the employee whether or not the same are duly receipted for in the name of the employer

4. Representation and transportation allowances which are fixed in amounts and are regularly received by the employees as part of their monthly compensation income shall not be treated as taxable fringe benefits


3. MOTOR the employer to the employee shall be treated as taxable FB of the employee whether or not the same are duly receipted for in the name of the employer

VEHICLE

OF ANY KIND


Case 3.A – The employer purchases the motor vehicle in the name of the employee.

Value of the benefit - Acquisition Cost

Monetary Value - Entire value of

the benefit

Tax Base - GMV


Case 3.B – The employer provides the employee with cash for the purchase of a vehicle in the name of the employee.

Value of the benefit - Amount of cash received

Monetary Value - Entire value of the benefit

Tax Base - GMV


Case 3.C – The employer shoulders a portion of the amount of the purchase price of a motor vehicle in the name of the employee.

Value of the benefit - Amount shouldered

by the employer

Monetary Value - Entire value of the benefit

Tax Base - GMV


Case 3.D– The employer purchases the car on installment in the name of the employee.

Value of the benefit - Acquisition cost (exclusive of Interest) divided by 5 years

Monetary Value - Entire value of the benefit

Tax Base - GMV


Case 3.D– The employer purchases the car on installment in the name of the employee.

Value of the benefit - Acquisition cost exclusive of interest divided by 5 years

Monetary Value - Entire value of the benefit

Tax Base - GMV


Illustration Case 3. D the name of the employee.Venus Co. purchased a car in the name of the manager on installment basis in the amount of P 396,000.

Value of the benefit

(P396,000 / 5 yrs) P 79,200.00

Monetary Value 79,200.00

GMV (P 79,200 / 68%) 116,471.00

Annual FBT (P 116,471x 32%) 37,271.00

Quarterly FBT P 9,317.75

=======


Case 3.E – The employer owns and maintains a fleet of motor vehicles for the use of the business and the employees.

Value of the benefit - Acquisition cost of all vehicles not normally used for bus. divided by 5yrs

Monetary Value - Entire value of the benefit

Tax Base - GMV


Illustration Case 3. E motor vehicles for the use of the business and the employees.

Pluto Co. owns a fleet of motor vehicles for the use of the business. It has recently bought four cars w/ total cost of P 5M for issuance to officers to be used for business and personal purposes.

Annual Value of the benefit

(P5M/ 5 yrs) P 1,000,000Monetary Value (50% of 1M) 500,000 GMV (P 500,000 / 68%) 735,294Annual FBT (P 735,294x 32%) 235,294

Quarterly FBT P58,824

=======


Case 3.F – The employer leases and maintains a fleet of motor vehicles for the use of the business and the employees.

Value of the benefit - Amount of rental payments for motor vehicles not normally used for business

Monetary Value - Entire value of the benefit

Tax Base - GMV


Illustrative Case 3.F motor vehicles for the use of the business and the employees.

Suppose Pluto Co. does not own the motor vehicles but leases them from Rent-a-Car, Inc, and pays quarterly rental of P 41,250 for the vehicle used by the employees for personal purposes.

Value of the benefit P 41,250Monetary Value (50% of P 41,250) 20,625 GMV (P 20,625 / 68%) 30,331

Quarterly FBT P 9,706

======


Case 3.G – The use of aircraft or helicopters owned and maintained by the employer shall not be subject to FBT.

Case 3.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 yacht shall be measured based on the depreciation of a yacht at an estimated useful life of 20 years.


4. HOUSEHOLD EXPENSES maintained by the employer shall not be subject to FBT.


Expenses of the employee borne by the employer subject to fbt

Salaries of household help, personal driver of the employee, and other.

2. Similar expenses like payment for homeowners association dues, garbage dues, etc.

EXPENSES OF THE EMPLOYEE BORNE BY THE EMPLOYER SUBJECT TO FBT



If an employer lends money to his employee free of interest or at a lower than 12%, such interest foregone by the employer shall be as taxable fringe benefit.

The benchmark rate of 12% shall remain in effect until revised by a subsequent regulation

The regulation shall apply to installment payments or loans with interest rate lower than 12% starting January 1, 1998.


Illustration 5. A or at a lower than 12%, such interest foregone by the employer shall be as taxable fringe benefit.

A local bank approved a loan of P 300,000 in favor of an officer with interest thereon at special rate of 8% per annum. Term of the loan is 4 months.

Interest foregone by the bank

(P 300,000 x 4% x 4/12) P 4,000

Value of the benefit P 4,000

GMP ( P 4,000/68%) P 5,882

FBT ( P5,882 X 32%) P 1,882

=======


6. SOCIAL AND ATHLETIC CLUB FEES or at a lower than 12%, such interest foregone by the employer shall be as taxable fringe benefit.

Membership fees, dues, and other expenses borne by the employer for his employee, in social and athletic clubs and other similar organizations shall be treated as taxable fringe benefits of the employee in FULL


7. EXPENSES FOR FOREIGN TRAVEL or at a lower than 12%, such interest foregone by the employer shall be as taxable fringe benefit.


FOREIGN TRAVEL BENEFITS WHICH ARE NOT TAXABLE or at a lower than 12%, such interest foregone by the employer shall be as taxable fringe benefit.

a.) Inland travel expenses such as expenses for food, beverages and local transportation;

b.) The cost of lodging in a hotel or similar establishment amounting to an average of US $ 300 or less per day

c. ) Cost of economy and business class airplane ticket;

d.) 70% of the cost of first class airplane ticket


2. FOREIGN TRAVEL BENEFITS WHICH ARE TAXABLE or at a lower than 12%, such interest foregone by the employer shall be as taxable fringe benefit.

a.) 30% of the cost of first class airplane ticket;

b.) Lodging cost in a hotel or similar establishment in excess of 300 US Dollars per day


c.) Traveling expenses paid by the employer for the travel of family members of the employee.

d.) When there is no documentary evidence showing that the employee’s travel abroad was in connection with business meetings or conventions

the entire cost of ticket, including cost of hotel accommodations and other expenses incident thereto shouldered by the employer, shall be treated as taxable FB.


8. HOLIDAY AND VACATION EXPENSES of family members of the employee.

ALL HOLIDAY AND VACATION EXPENSES OF THE EMPLOYEE BORNE BY THE EMPLOYER SHALL BE TREATED AS TAXABLE FRINGE BENEFIT


9. EDUCATIONAL ASSISTANCE TO THE EMPLOYEE OR HIS DEPENDENTS of family members of the employee.

The cost of educational assistance to the employee which is borne by the employer shall, in general, be treated as taxable FB.


Exception
EXCEPTION: of family members of the employee.

A scholarship grant to the employee by the employer shall not be treated as taxable fringe benefit if:

1.) the education or study involved is directly connected with the employer’s trade, business or profession, and

2.) there is a written contract that the employee is under obligation to remain in the employ of the employer for a period of time mutually agreed upon.


The cost of educational assistance extended by an employer to the dependents shall be treated as taxable fringe benefits of the employee.

EXCEPTION::When the assistance is provided through a competitive scheme under a scholarship program of the company.


10. COSTS OF INSURANCE to the dependents shall be treated as taxable fringe benefits of the employee.

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.


Exceptions non taxable
EXCEPTIONS/NON-TAXABLE to the dependents shall be treated as taxable fringe benefits of the employee.

a.) Contributions to the SSS, GSIS and similar contributions under the provisions of any existing law;

b.) The cost of premiums borne by the employer for the group insurance of his employees.


FRINGE BENEFIT NOT SUBJECT TO FRINGE BENEFITS TAX to the dependents shall be treated as taxable fringe benefits of the employee.

FB which are exempted from income tax under the Tax Code or under special law;

Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans;


Fringe benefit not subject to fringe benefits tax
FRINGE BENEFIT NOT SUBJECT TO FRINGE BENEFITS TAX to the dependents shall be treated as taxable fringe benefits of the employee.

  • Benefits given to rank and file, whether under a collective bargaining agreement or not;

  • 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;


Fringe benefit not subject to fringe benefits tax1
FRINGE BENEFIT NOT SUBJECT TO FRINGE BENEFITS TAX to the dependents shall be treated as taxable fringe benefits of the employee.

  • If the grant of fringe benefits to the employee is for the convenience of the employer;

    F. “De Minimis” Benefits


TAXATION OF FRINGE BENEFIT OF NON RESIDENT ALIEN NOT ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

a. Rate - 25%

Tax Base - the gross-up monetary

value of fringe benefit computed by dividing the monetary value of FB by 75%


FILING OF RETURN AND PAYMENT OF TAX ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

DEADLINE:

on or before the 10th day of the month following the end of quarter in which the fringe benefits were granted (RR 4-2002)

On or before the 15th day of the month ff the end of the quarter for employers registered with Electronic Filing and Payment System (EFPS)

USE BIR FORM 1603: Quarterly Remittance Return of Income Taxes Withheld.


DE MINIMIS BENEFITS ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

- furnished or offered by an employer to his employees, are not considered as compensation subject to income tax an consequently to withholding tax, if such facilities are offered or furnished by the employer merely as means of promoting health, goodwill, contentment, or efficiency of his employees.


De minimis benefits
De Minimis Benefits ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

  • “DE MINIMIS BENEFITS” conforming to the ceiling shall not be considered in determining the P 30,000

  • the excess over the respective ceilings shall be considered as part of the “other benefits” and the employee receiving it will be subject to tax only on the excess over the P30,000.


Submission of Form 2316 ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES(RR 11-2013)

  • Shall be given to employees on or before Jan. 31 the

  • ff year

  • Employers of Minimum Wage Earners are still

  • required to issue Form 2316 on or before Jan. 31

  • of the ff year


Submission of Form 2316 ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

(RR 11-2013) (cont.)

  • In cases covered with substituted filing,

    • employer shall furnish each employee with the original copy of Form 2316 and

    • file/submit to the BIR the duplicate copy not later than Feb. 28 ff the close of the taxable year.


Submission of Form 2316 ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

(RR 11-2013) (cont.)

  • Penal provision (Sec. 250)

    • P1,000 for each failure but not to exceed P25,000

  • If committed in two consecutive years

    • P10,000 and suffer imprisonment of not less than 1 year and not more than 10 years

    • May be compromised at P1,000 for each Form 2316 not filed without any maximum threshold


  • THANK YOU ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES


You may visit ENGAGED IN TRADE OF BUSINESS IN THE PHILIPPINES

susantusoy.weebly.com


ad