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RR 3-98
RR 3-98
The tax imposed under Sec. 33 of the Code shall be treated as a final income
tax on the employee which shall be withheld and paid by the employer on a calendar
quarterly basis as provided under Sec. 57 (A) (Withholding of Final Tax on certain
Incomes) and Sec. 58 A (Quarterly Returns and Payments of Taxes Withheld) of the
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Code.
The grossed-up monetary value of the fringe benefit represents the whole
amount of income realized by the employee which includes the net amount of money
or net monetary value of property which has been received plus the amount of fringe
benefit tax thereon otherwise due from the employee but paid by the employer for and
in behalf of his employee, pursuant to the provisions of this Section.
Coverage — These Regulations shall cover only those fringe benefits given or
furnished to managerial or supervisory employees and not to the rank and file.
The term, "RANK AND FILE EMPLOYEES" means all employees who are
holding neither managerial nor supervisory position. The Labor Code of the
Philippines, as amended, defines "managerial employee" as one who is vested with
powers or prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
"Supervisory employees" are those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. cdtai
Moreover, these regulations do not cover those benefits properly forming part
of compensation income subject to withholding tax on compensation in accordance
with Revenue Regulations No. 2-98.
Fringe benefits which have been paid prior to January 1, 1998 shall not be
covered by these Regulations.
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benefits which are "required by the nature of, or necessary to the trade, business or
profession of the employer, or when the fringe benefit is for the convenience or
advantage of the employer" are not subject to the fringe benefit tax. Thus, in cases
where the fringe benefits entail joint benefits to the employer and employee, the
portion which shall be subject to the fringe benefits tax and the guidelines for the
valuation of fringe benefits are defined under these rules and regulations.
(1) Housing;
(5) Interest on loan at less than market rate to the extent of the
difference between the market rate and actual rate granted;
(6) Membership fees, dues and other expenses borne by the employer
for the employee in social and athletic clubs or other similar
organizations;
For this purpose, the guidelines for valuation of specific types of fringe
benefits and the determination of the monetary value of the fringe benefits are given
below. The taxable value shall be the grossed-up monetary value of the fringe benefit.
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(1) Housing privilege —
WHERE:
MV = MONETARY VALUE
FMV = FAIR MARKET VALUE
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(a) In general, expenses incurred by the employee but which
are paid by his employer shall be treated as taxable fringe
benefits, except when the expenditures are duly receipted
for and in the name of the employer and the expenditures do
not partake the nature of a personal expense attributable to
the employee.
(b) If the employer provides the employee with cash for the
purchase of a motor vehicle, the ownership of which is
placed in the name of the employee, the value of the
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benefits shall be the amount of cash received by the
employee. The monetary value of the fringe benefit shall be
the entire value of the benefit regardless of whether the
motor vehicle is used by the employee partly for his
personal purpose and partly for the benefit of his employer,
unless the same was subjected to a withholding tax as
compensation income under Revenue Regulations No. 2-98.
MV = [(A)/5] X 50%
where:
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MV = Monetary value
A = acquisition cost
(b) The benchmark interest rate of twelve per cent (12%) shall
remain in effect until revised by a subsequent regulation.
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January 1, 1998. prcd
(6) Membership fees, dues, and other expenses borne by the employer
for his employee, in social and athletic clubs or other similar
organizations. — These expenditures shall be treated as taxable
fringe benefits of the employee in full.
(c) Travelling expenses which are paid by the employer for the
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travel of the family members of the employee shall be
treated as taxable fringe benefits of the employee.
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(C) Fringe Benefits Not Subject to Fringe Benefits Tax — In general,
the fringe benefits tax shall not be imposed on the following fringe
benefits:
(3) Benefits given to the rank and file, whether granted under a
collective bargaining agreement or not;
The exemption of any fringe benefit from the fringe benefit tax
imposed under this Section shall not be interpreted to mean
exemption from any other income tax imposed under the Code
except if the same is likewise expressly exempt from any other
income tax imposed under the Code or under any other existing
law. Thus, if the fringe benefit is exempted from the fringe benefits
tax, the same may, however, still form part of the employee's gross
compensation income which is subject to income tax, hence,
likewise subject to a withholding tax on compensation income
payment.
The term "DE MINIMIS" benefits which are exempt from the
fringe benefit tax shall, in general, be limited to facilities or
privileges furnished or offered by an employer to his employees
that are of relatively small value and are offered or furnished by
the employer merely as a means of promoting the health, goodwill,
contentment, or efficiency of his employees such as the following:
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(1) Monetized unused vacation leave credits of employees not
exceeding ten (10) days during the year ;
(D) Tax Accounting for the Fringe Benefit Furnished to the Employee
and the Fringe Benefit Tax Due Thereon. — As a general rule, the
amount of taxable fringe benefit and the fringe benefits tax shall
constitute allowable deductions from gross income of the
employer. However, if the basis for computation of the fringe
benefits tax is the depreciation value, the zonal value as
determined by the Commissioner pursuant to Section 6(E) of
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the Code or the fair market value as determined in the current real
property tax declaration of a certain property, only the actual fringe
benefits tax paid shall constitute a deductible expense for the
employer. The value of the fringe benefit shall not be deductible
and shall be presumed to have been tacked on or actually claimed
as depreciation expense by the employer.
(1) During the year 1998, ABC Corporation paid for the
monthly rental of a residential house of its branch manager
(Mr. Dela Cruz) amounting to P66,000.00.
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Debit: Fringe Benefit Expense P66,000
Debit: Fringe Benefit Tax Expense P17,000
Recommending Approval:
LIWAYWAY VINZONS-CHATO
Commissioner
Bureau of Internal Revenue
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Endnotes
1 (Popup - Popup)
RA 8424
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