SECTION 2.57.1. Income Payments Subject to Final Withholding Tax. — The
following forms of income shall be subject to final withholding tax at the rates herein specified;
(J)(G) Fringe Benefits Granted to the Employee (Except Rank and File Employee). — [formerly under letter (J)] There shall be imposed a final tax of 34% beginning January 1, 1998; 33% beginning January 1, 1999 and 32% beginning January 1, 2000 and thereafter, Oon the grossed-up monetary value of fringe benefits, granted or furnished by the employer to his employees (except rank and file as defined in the Code). (per Section 1 of RR No. 11-2018, 15 March, retroactively effective to 01 January)
Employee is a citizen/resident Thirty-five percent (35%) alien/ non-resident alien engaged in trade or business within the Philippines
Employee is a non-resident Twenty-fiver percent (25)
alien not engaged in trade or business within the Philippines
(per Section 1 of RR No. 11-2018, 15 March, retroactively
effective to 01 January)
The grossed-up value of the fringe benefit shall be determined by dividing the actual monetary value of the fringe benefit by the difference between one hundred percent (100%) and the applicable rate of income tax. The actual monetary value of the fringe benefit shall be divided by sixty-five percent (65%) to get the grossed-up value subject to 35% fringe benefit tax (FBT); while the divisor shall be seventy-five percent (75%) to get the grossed-up value subject to 25% FBT. (per Section 1 of RR No. 11-2018, 15 March, retroactively effective to 01 January)
Fringe benefits however, which are required by the nature of or necessary to the trade, business or profession of the employer, or where such fringe benefit is for the convenience and advantage of the employer shall not be subject to the fringe benefits tax.
The term fringe benefit means any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees) such as but not limited to, the following:
(1) Housing; (2) Expense account; (3) Vehicle of any kind; (4) Household personnel, such as maid, driver and others; (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; (7) Expenses for foreign travel; (8) Holiday and vacation expenses; (9) Educational assistance to the employee or his dependents; and (10) Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows
Fringe benefits granted to the following employees and taxable under Sec. 25 (B), (C), (D) and (E) shall also be subject to the fringe benefit tax to wit:
Sec. 25(B) Non-resident alien individual not engaged in trade or business in the Philippines. Sec. 25(C) Alien individual employed by regional or area headquarters and regional operating headquarters of a multinational company, including any of its Filipino employees employed and occupying the same position as those of its aforesaid alien employees; Sec. 25(D) Alien individual employed by an offshore banking unit of a foreign bank established in the Philippines, including any of its Filipino employees employed and occupying the same position as those of its aforesaid alien employees; Sec. 25(E) Alien individual employed by a foreign service contractor and subcontractor engaged in petroleum operations in the Philippines, including any of its Filipino employees employed and occupying the same position as those of its aforesaid alien employees.
The computation and the scheme for withholding the tax on fringe benefits shall be governed by such revenue orders that the Commissioner shall issue as guidelines and clarifications for its proper and consistent implementation.