Question & AnswerQ&A (BIR REGULATIONS NO. 3-98)
The fringe benefits tax rate effective January 1, 1998, is 34% on the grossed-up monetary value of the fringe benefit.
Rank and file employees are exempted from the fringe benefits tax under these Regulations. Also, fringe benefits required by the nature of the employer's trade, business or profession, or for the convenience or advantage of the employer, are exempted.
For 1998, the grossed-up monetary value is computed by dividing the monetary value of the fringe benefit by 66%.
Fringe benefit means any good, service, or other benefit furnished or granted by an employer in cash or in kind, in addition to basic salaries, to managerial or supervisory employees, such as housing, vehicle, household personnel, educational assistance, and others, except for rank and file employees.
Fringe benefits not subject to tax include those authorized and exempted by law, contributions to retirement and insurance plans, benefits given to rank and file employees, de minimis benefits, and those required or convenient to the employer's trade or business.
The annual value is 5% of the market value or zonal value of the land and improvement, whichever is higher, and the taxable monetary value is 50% of that amount.
De minimis benefits are small-value facilities or privileges offered to employees to promote health, goodwill, contentment, or efficiency, including monetized unused vacation leave not exceeding ten days, rice subsidy, uniforms, laundry allowance, employee awards (limited value), and company picnics.
The employer should debit 'Fringe Benefit Expense' and 'Fringe Benefit Tax Expense' accounts, and credit cash or payable accounts for the total amount paid, reflecting both the value of the benefit and the tax paid.
A fringe benefit tax of 25% is imposed on the grossed-up monetary value of the fringe benefit for such non-resident alien individuals.
Reasonable business expenses paid by the employer for foreign travel related to business meetings or conventions are not treated as taxable fringe benefits, provided there is documentation proving the business purpose.