6 Benefits Exempt from Fringe Benefits Tax in Philippines

By: Garry S. Pagaspas

Under the Tax Code, fringe benefits subject to fringe benefits tax in the Philippines 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) such as but not limited to the following:

  • Housing,
  • Expense account,
  • Vehicle of any kind,
  • Household personnel, such as maid, driver and others,
  • Interest on loans at less than market rate to the extent of the difference between the market rate and actual rate granted,
  • Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations,
  • Expense for foreign travel,
  • Holiday and vacation expenses,
  • Educational assistance to the employee or his dependents, and,
  • Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows

The above enumeration are sample taxable fringe benefits given by the employer to the employee who is either a managerial employee or supervisory employee.  Benefits of similar nature are also subject to fringe benefits tax in the Philippines but does not necessarily mean every benefit is taxable.  The following benefits are not subject to fringe benefits tax:

1. Fringe benefits which are authorized and exempted from tax under special laws;

This reservation gives due respect to the other provisions of tax and other special laws tending to provide non-taxable benefits. This applies to those benefits that may have been existing as of the effectivity of fringe benefits tax in the Philippines last January 1998, and those that may later be legislated.

2. Contributions of the employer for the benefit of the employees to retirement, insurance and hospitalization benefit plans;

This is in relation to the private retirement benefits under a reasonable private benefit plan and the retirement benefits provided by the Labor Code of the Philippines. These provisions are covered by another set of rules for taxation so the fringe benefits tax does not apply.

3. Benefits given to rank and file employees, whether granted under a collective bargaining agreement or not;

If the recipient employee is a rank-and-file employee, then, the benefit is not subject to fringe benefits tax, but to withholding tax on compensation. It is but logical because rank-and-file employees are the least possible recipients. If I am a business owner, I might not be in my right state of mind if I will provide a housing or a car to my messenger more than my managers.

4. De minimis benefits

This are benefits of relatively small values provided by the employer to the employees for their general welfare. While they will benefit the employees, their immateriality did not warrant taxability under fringe benefits tax in the Philippines. At the moment, their are ten (10) tax-exempt de minimis benefits. See related article…

5. Benefits required by the nature of or necessary to the conduct of trade or business or profession

This one describes the nature of fringe benefits – one that is beneficial to the employee. As such, benefits that are required by the nature of business, or necessary to the conduct of trade or business is not taxable because they tend to work for the business and not for the managerial or supervisory employee.

6. Benefits under employer convenience rule

This refers to a benefit provided by the employer for the employee but which would be more beneficial to the employer than to the employee.  As such, they are not considered as taxable.

Example: Mr. De la Cruz is a technician manager of a refrigeration plan in Laguna where a single power loss of 5mins would bring about millions of losses. To prevent such losses, Mr. De la Cruz was provided a housing benefit  in Laguna because it would take him two (2) hours to travel from his Bulacan residence to Laguna plant.

I believe this scenario would tend to benefit the employer than the employee. Accordingly, the same is no longer subject  to fringe benefits tax in the Philippines.

The best part of the above benefits exempt from fringe benefits tax is the fact that they remain to be a deductible expense without the need to pay the 32% fringe benefits tax in the Philippines.

Related article

Fringe Benefits Tax in the Philippines


Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances.


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