EAA Tax Series - Fringe Benefits Tax 101

EAA Tax Series - Fringe Benefits Tax 101
Dear *|IF:NICKNAME|* *|NICKNAME|* *|ELSE:FNAME|* *|FNAME|*, If you want to provide benefits to your employees apart from their basic salary, then you should know that this is a form of a "fringe benefit" that is taxable by the government. The reason for this is that the government views the benefit as a form of income for your employee. Read on to learn how to compute for Fringe Benefits Tax. Soooo... what exactly are fringe benefits? A "fringe benefit" is any good, service, or other benefit furnished or granted by an employer, in cash or in kind, in addition to basic salaries. Examples of fringe benefits include the following : Housing Expense account Vehicles Household personnel 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 Foreign travel expenses Holiday/Vacation Expenses Education assistance to employee and his/her dependents Life or health insurance, non-life insurance premiums or similar amounts in excess of what the law allows What is Fringe Benefits Tax? Fringe Benefits Tax is a final tax on the grossed-up monetary value of the fringe benefit being given to a managerial or supervisory employee. It is considered a final income tax on the employee. Regardless of whether the employer is an individual, partnership, or corporation, this tax applies. How do you compute for fringe benefits tax? As of January 1, 2000, the Fringe Benefits tax rate is 32% of the grossed up monetary value of the benefit. To get the Fringe Benefits tax, you first need compute for the grossed up monetary value. Here is the equation: Grossed Monetary Value (GMV) = Monetary Value/68% After you have computed for the GMV, you can now compute for the Fringe Benefits Tax. Fringe Benefits Tax = Grossed Up Monetary Value x 32% How do you evaluate the value of the Fringe Benefit if it is not in monetary form? Property If the property is transferred under the employee's name, the monetary value of the fringe benefit is based on the fair market value of the property. If the property is under the employer's name, the monetary value of the fringe benefit is equal to the depreciation value of the property. If you want to learn more about Fringe Benefits Tax, you can watch our FREE video tutorial. You can watch Sarah Songalia, the Managing Director of Entrepreneurs Accounting Academy, as she teaches you how to compute for Fringe Benefits Tax by following her through a sample computation. She will also explain how to journalize the transaction in your books.   This is just a general overview of the Fringe Benefits Tax. There are still many elements and exemptions that you need to know. If you want to learn the ins and outs of the Philippine taxation system, join us for our Comprehensive Tax Seminar on February 23, 2012. This 1-day seminar will teach everything you need to know about fringe benefits tax, value added tax, withholding tax on wages, expanded withholding tax, corporate income tax, local government taxes, and many more. Call us at (632) 576 4423 | 310 3857 | 215 4824 to learn more.   Entrepreneurs Accounting Academy info@eaa.edu.ph 1006 Rufino Plaza, 6784 Ayala Avenue Makati City Tel. no. 310.3857 | 576.4423 | 215.4824 Mobile no. 0917.854.1357 | 0918.990.7278 | 0932.888.4117 "FOLLOW" us on Twitter