Fringe benefit is a special form of benefits you provide your employees on in addition to their salaries and wages. It means any good, service or other benefit furnished or granted in cash or in kind by an employer – corporate or sole proprietor, to an individual employees. Providing the employees with such fringe benefits may be based on your company policy, or based on the contract with your employees. It could be a business related expense tending to personally benefit the employee like a vehicle to be used for business meetings and for personal travels, or a purely personal expense intended to benefit the employee like housing personnel – house maid or family drivers. In either case, they are treated as business expenses because they represents your expense payments relative to their employment. However, you have to pay fringe benefits tax in order for you to be allowed to claim the amount of fringe benefit and the amount of tax paid.
Hereunder are the sample fringe benefits that your may provide your employees but is not exclusive and you may still provide other benefits not enumerated herein:
Taxability of Fringe Benefits
Fringe benefits provided to managerial and supervisory employees are subject to 32% fringe benefit tax and you will withhold and pay the same as an employer. This means that the employee is no longer liable for the fringe benefit tax (FBT) and in case of non-payment, the Bureau of Internal Revenue (BIR) will run after you and not your managerial or supervisory employees. You base the 32% FBT on the grossed-up monetary value of fringe benefit in accordance with the valuation guidelines provided by the Bureau of Internal Revenue (BIR) in Revenue Regulations No. 13-1998. Please go through the regulations for more details on the valuation and computations. As employer , you will file FBT on a quarterly basis using BIR Form No. 1603 (Click to download form).
For special managerial or supervisory employees not covered by the 5-32% income tax rules, the FBT rates would vary depending on house they are taxes. The reason is that the FBT tends to recover the income tax of the employee so the rate follows the income taxation of such employees as follows:
If an employee is a rank-and-file, then, you apply withholding tax on compensation rules and not FBT rules. Likewise, please note the following fringe benefits which are not taxable when provided by you as employer to your managerial and supervisory employees:
Providing fringe benefits is a management consideration that you should consider. One it would benefit the employee so as to boost him to perform, and, the other is you can claim more expenses. However you have to pay fringe benefits tax, where, applicable.
Section 33 of the Tax Code, as amended
Revenue Regulations 3-1998 – Fringe Benefits Tax Regulations
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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