You’re an employee, grinding away at your job, and suddenly, a delightful surprise lands in your lap. No, it’s not a wad of cash, but something equally exciting: fringe benefits! These amazing compensation or rewards come in a non-monetary form, adding an extra sparkle to your regular salary.
The employer provides fringe benefits to add to the regular salaries of their employees. It could be a bonus, housing allowance, meal perks, and countless other tantalizing benefits. It’s like a treasure trove of workplace wonders just waiting to be explored. Let’s dive into the captivating realm of fringe benefits, and what this means for you when it comes to filing taxes.
Fringe Benefits Tax (FBT)
According to accounting services in the Philippines, the fringe benefits tax is imposed indirectly on employers who give their employees additional benefits. If you’re an employee at the receiving end of these perks, feel extra appreciative for this gesture because your employer is bearing the brunt of the taxes. If you are one of the individuals who need to pay the fringe benefits tax, part of your obligation is to accomplish it yearly. It would also require you to file your returns with the BIR.
Currently, the fringe benefits tax rate is 35% for the residents and citizens of the Philippines. If you are not a resident of the Philippines, the FBT rate would be 25%.
Who and What Perks are Subject to FBT
If you are a corporate employer or an individual taxpayer who gives benefits to your staff or top management, you are subject to the fringe benefits tax. Tax services in Manila say that if you are self-employed or a professional (doctor, lawyer, etc.) you do not need to pay the fringe benefits tax.
Some of the benefits that are subject to the fringe benefits tax include the following:
- Cash allowance
- Housing benefit
- Transportation cost
- Rental reimbursement
- Entertainment expense
- Food expense
- Vehicle
- Foreign travel expense
- Vacation Expense
- Educational assistance
- Health insurance
Note that you need to pay fringe benefits tax first before you can proceed to providing your employees the benefits. This is to make sure you are complying with the law and avoid legal issues.
What are Not Subject to FBT
The following are the fringe benefits that are not taxable to FBT or fringe benefits tax:
- Fringe benefits required or necessary to business, profession, or advantage of the employer.
- Fringe benefits that are authorized and exempted from tax under a special law
- The contributions of the employer to the employee’s insurance, retirement, and hospitalization benefit plans.
- Fringe benefits that are given to rank-and-file employees (granted or not by a bargaining argument) but are subject to withholding tax on compensation unless stated that it is tax-exempt.
- Small value or de minimis benefits that are defined in the rules and regulations
How to Calculate Fringe Benefits Tax
You need to calculate or determine the grossed-up value or tax base of the fringe benefits. You need to divide the actual amount of the benefit that was granted by 65% (for residents subject to the 35% FBT) or divide by 75% (for non-residents levied with 25% FBT).
To illustrate, if the fringe benefit was worth PHP 200,000 and the fringe benefits tax rate is 35%, the grossed-up value or tax base would be equal to PHP 307, 692.
200,000 / 65% = 307,692
After that, you need to determine the fringe benefits tax payable by multiplying the fringe benefits tax rate by the grossed-up value or tax base.
(65%) (307,692) = 107,202
Therefore, your fringe benefits tax payable is PHP 107, 202.
This is how you can record it in your books.
| Fringe Benefit Expense | 200,000 | |
| FBT Expense | 107,202 | |
| FBT Payable | 107, 202 | |
| Cash | 200,000 |
FBT Remittance and Deadline
You must remit your FBT on or before the 10th day of the month following the quarterly calendar when the benefit was granted or paid. If the fringe benefits were given in January, they should be remitted on the 10th of April. If you do not comply, tax and audit services in the Philippines say you will face penalties and interest fees.
Use the BIR Form 1603 or the Quarterly Remittance of Final Income Tax Withheld to file for it. You need to make sure you know and understand your obligations, especially in computing and remitting the fringe benefits tax on time. Make sure you remit on or before the deadline. Comply so you won’t need to worry about facing penalties and interest fees.
In the fast-paced world of fringe benefits and taxes, knowledge and timeliness are your greatest allies. Make it a priority to understand your obligations, master the art of computing and remitting the FBT, and always stay one step ahead of the deadline. If you need assistance, call our accounting services in Pasig to ensure everything is smooth sailing. Our experts ensure you leave behind any worries and attain peace of mind.
