Unlocking the Secrets of Fringe Benefits Tax

Picture this: you’re a hardworking employee, putting in your blood, sweat, and tears to make ends meet. Fortunately, there are benefits waiting for you beyond just your regular salary. Those fringe benefits are tantalizing non-monetary rewards bestowed upon you by your generous employer. 

 

From bonuses to housing allowances, meal perks to extravagant vacations, these little extras can make a world of difference in your life. But before you get lost in a daydream of luxurious fringe benefits, let’s dive into the nitty-gritty of the Fringe Benefits Tax (FBT) that lurks behind them.

The Lowdown on Fringe Benefits Tax (FBT)

In the Philippines, there’s an FBT of Fringe Benefits Tax. It’s a sneaky little tax that indirectly targets employers who offer their employees additional perks. If you find yourself on the list of generous givers, brace yourself for the FBT and ensure your accounting and bookkeeping are on point. It’s your obligation to pay and file this tax with the BIR yearly. If you’re an employee, be very grateful to your employers for going above and beyond to give you these benefits. 

 

As for the FBT rates, let’s break it down. If you’re a resident or citizen of the Philippines, the FBT rate that looms over your head is a hefty 35%. If you’re not a resident, the FBT rate shrinks down to a more manageable 25%.

Who's Subject to the FBT?

If you’re a corporate employer or an individual taxpayer who delights in bestowing benefits upon your staff or top brass, you’ll have to deal with the FBT. But hold on a second! If you’re a self-employed professional, like a doctor or lawyer, you can breathe a sigh of relief. Phew, you’re exempted! 

Fringe Benefits Under the FBT Radar

Brace yourself for a tantalizing list of perks that the taxman keeps a watchful eye on:

  • Cash allowance
  • Housing benefit
  • Transportation cost
  • Rental reimbursement
  • Entertainment expense
  • Food expense
  • Vehicle
  • Foreign travel expense
  • Vacation Expense
  • Educational assistance
  • Health insurance

 

Now, hold it! Before you shower your employees with these benefits, you must pay the FBT upfront. This way, you stay on the right side of the law and avoid any unwelcome legal tangles. 

Fringe Benefits That Slip Through the Cracks

Not all fringe benefits are created equal in the eyes of the BIR. Some lucky perks are exempted or manage to escape the clutches of taxation, such as:

  • If it’s fringe benefits required for the success of your business or profession
  • Fringe benefits authorized and exempted by special laws
  • Contributions to employee insurance, retirement, and hospitalization benefit plans
  • Fringe benefits for hardworking rank-and-file employees but subject to withholding tax compensation get a reprieve unless explicitly stated
  • Small value or de minimis benefits, as defined by the rules and regulations

Cracking the Code: Calculating the FBT

It’s time to decode the calculations and determine the grossed-up value or tax base of those fringe benefits. To find this value, take the actual amount of the benefit granted and divide it by 65% (subject to the 35% FBT rate) or divide it by 75% (subject to the 25% FBT rate), depending on your resident status. 

 

For example, if the fringe benefit is worth PHP 200,000 and you’re under the 35% FBT rate, the grossed-up value will be PHP 307,692.

 

Once you’ve cracked the code and found the grossed-up value, determine the actual FBT payable. Multiply the fringe benefits tax rate by the grossed-up value, and voila! You have your answer. In our example, the FBT payable would be PHP 107,202.

Now, all that’s left is to record these figures in your accounting books, and you’re good to go.

Fringe Benefit Expense

200,000

 

FBT Expense

107,202

 

FBT Payable

 

107, 202

Cash

 

200,000

 

Remember, knowledge is power, and being FBT-savvy puts you in control. When you understand your obligations towards non-monetary employee rewards, you can stay on top of your bookkeeping records and keep your FBT calculations sharp to be on the good side of the BIR.

FBT Remittance and Deadline: Stay Ahead of the Game

Time is of the essence when it comes to fulfilling your FBT obligations. When it comes to remitting your FBT, remember this rule: the 10th day of the month following the quarterly calendar in which the benefit was granted or paid is your deadline. 

 

Let’s break it down. If those fringe benefits were showered upon your fortunate employees in January, you must make the FBT remittance by the 10th of April. It’s like a quarterly countdown, ensuring that the BIR receives what’s due.

Failing to comply with this deadline can lead to unwelcome penalties and interest fees knocking on your door. To make the FBT remittance process a breeze, grab BIR Form 1603 or the Quarterly Remittance of Final Income Tax Withheld. This handy document will help you navigate the intricate realm of FBT remittance. If you need help, you can call our team to keep the BIR at bay and avoid any unwanted consequences.

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