Updated Fringe Benefit Tax – Train Law

Fringe Benefits are those benefits given by an employer to an employee that are not considered as de minimis benefits. Fringe Benefits that are given to Rank and File Employees are subject to regular income taxation (graduated tax rate) while fringe benefits given to Managerial and Supervisory Employees are subject to Fringe Benefit Tax (also considered a final tax) which was amended by the Train Law.

List of Fringe Benefits

  1. Housing Benefits
  2. Expense Account
  3. Membership and other fees paid by employer for social/athletic clubs
  4. Household personnel such as maid or driver
  5. Interest grant on a loan, for the difference between the market rate and actual interest grant
  6. Vehicles of Any Kind
  7. Expenses for foreign travel
  8. Holiday and Vacation Expenses
  9. Educational assistance to the employee or his dependents
  10. Life/health/other non-life insurance premiums in excess of what law allows

General Rule on Valuation of Fringe Benefit

  1. If the Fringe Benefit is given in cash, the value is the total amount of the cash received by the employee, except if the cash would be used to pay rent. If cash is given to be used for rental payment, only 50% of the cash received will be recognized as the value of the fringe benefit.
  2. If non-cash asset is given such as vehicle or house and lot, the value of the non cash asset would be considered as the value of the fringe benefit.
  3. If a managerial or supervisory employee is given free use of a non-cash asset, such as use of a car, the fringe benefit would be 50% of the rental value or depreciation value of the asset. Vehicles would be depreciated over five years while real property would be depreciated over 20 years.

Computation of Updated Fringe Benefit Tax

There are 3 steps in computation of Fringe Benefit Tax

  1. Determine the value of the fringe benefit.
  2. Compute the grossed up monetary value.
  3. Multiply the grossed up monetary value by the rates applicable for each individual. The rate for all individuals excluding nonresident aliens not engaged in trade or business and special aliens is 35%. The Fringe Benefit tax rate for NRA-NETBs is 25% while the FBT rate for special aliens is 15%.
Fringe Benefit Tax Computation

Fringe Benefit Tax Computation