INCOME TAXATION Chap 5 PG (184-192) PDF

FRINGE BENEFIT OF NRA(NETB)
A non-resident alien not engaged in trade or business in the Philippines who receives a fringe benefit is subject to fringe benefit tax at the rate of
twenty-five percent (25%)
The tax base shall be the grossed-up monetary value which is computed by dividing the monetary value of the benefit by seventy-five percent
(75%)
Illustration 6: Madonna Casey, an American residing in the United States and not engaged in trade or business in the Philippines was invited to
perform a one-night concert in the Philippines at a fee of P3,500,000. After the concert, she was given by her employer in the Philippines a “3-day
all expenses paid vacation” in Boracay. The expenses of which amounted to P120,000.
REQUIREMENTS: SOLUTION:
1. How much is the final tax on the professional fee?
1. Professional fee P3,500,000
2. How much is the fringe benefit tax? Rate of tax 25%
Final tax 875,000
2. Value of benefit 120,000

Divide by 75%
Grossed-up monetary value 160,000
ACCOUNTING APPLICATION OF FRINGE BENEFIT Rate of tax 25%
Fringe benefit tax 40,000
EXPENSE AND FRINGEBENEFIT TAX
Illustration 7:
Gelen Labis Corporation owns a condominium unit. During the year, the said corporation furnished and granted the said property for the
residential use of its Assistant Vice- President. The zonal value amounts to P10,000,000 while its fair market value per Real Property Tax
Declaration amounts to P8,000,000.
SOLUTION:
REQUIREMENTS:
1. Computation of fringe benefit tax
1.Compute the monthly fringe benefit tax
Monetary value [(5% (10,000,000)] x 50% P250,000,000
due thereon
Monthly rental value (250,000/12) 20,833.33
2. Give the accounting entry to record fringe benefit
Divide by 65%
tax expense
Grossed-up monetary value 32,051.28
3. Give the entry to record the
Rate of tax 35%
monthly amortization if the acquisition cost Fringe benefit tax 11,217.952.
of the property is P7,000,000 only and its Journal Entry to record the Fringe Benefit tax expense for the residential
remaining estimated useful life is 15 years. property furnished to employees.
Fringe benefit tax expense P11,217.95
Cash/Fringe Benefit tax payable P11,217.95
NOTE:
Gelen Labis Corporation cannot claim fringe benefit expense as deduction since the cost for the use of the property had already been recovered as
deduction from gross income under Depreciation Expense. However, the fringe benefit tax expense is allowed as a deduction from gross income.
3. To record the monthly amortization of excess of zonal value over Zonal value P10,000,000
acquisition cost.
Less: Acquisition cost (7,000,000)
Fringe benefit expense P16,667.67
Excess 3,000,000
Fringe benefit tax 11,217.95
Monthly amortization [(3,000,000/15 yrs.)
Income construcively realized P16,667.67
12 months] 16,666.67
Cash/Fringe benefit tax payable 11,217.95
NOTES: If the cost of the condominium unit subject to depreciation allowance (P7,000,000) is lesser than its zonal value (P10,000,000), the
excess amount is P3,000,000 shall be amortized throughout the remaining estimated useful life (15 years) of the residential property used in
computing the said employer’s depreciation expense and allowed as a deduction from the said employer’s gross income as fringe benefit expense.
Illustration 8:
On December 31, 2018 Jose Rizal Memorial Corporation paid P6,500 for the monthly rental of the residential house or Mr. Melvin Tan, the
company’s branch manager in Dagupan City.
REQUIREMENTS:
1. Compute the fringe benefit tax due thereon.
2. Give the accounting entries to record payment of the fringe benefit expense and the fringe benefit tax expense.
3. Give the accounting entries if the fringe benefit tax and fringe benefit expense have already accrued but not yet paid.
SOLUTION: Journal Entry to record payment of fringe benefit expense
and fringe benefit tax expense.
Fringe benefit expense P6,500
1. Grossed-up monetary value (6,500/65%) P10,000 Fringe benefit tax expense 1,750
Multiply by the taxable portion 50% Cash P8,2503
Grossed-up monetary benefit 5,000
Multiply by the tax rate 35% Journal entry if the fringe benefit expense and the fringe
Fringe benefit tax 1,7502 benefit tax expense has already accrued but not yet paid.
Fringe benefit expense P6,500
Fringe benefit tax expense 1,750
Fringe benefit payable P6,500
Fringe benefit tax payable 1,750
NOTE: Both the Fringe benefit expense and the Fringe benefit tax expense shall be allowed as deduction from the gross income of Jose Rizal
Memorial Corporation.
FILING OF TAX RETURNS

The tax return (BIR form no. 1603) on the fringe benefits furnished or granted to employees other than rank
and file shall be filed in triplicate by every withholding agent/payor, whether individual or non-individual, required to deduct and
withhold taxes on fringe benefits. If the Government of the Philippines, its political subdivisions or any Agency or
Instrumentality, as well as government-owned or controlled corporations is the withholding agent/payor, the return may be made
by the officer or employee having control or disbursement of income payment or other officer or employee appropriately
designated for the purpose. If the person required to withhold and pay the tax is a corporation, the return shall be made in the
name of the corporation and shall be signed and verified by the president, vice-president, or any authorized officer and
countersigned by the treasurer or assistant treasurer.
PAYMENT OF TAX
The tax return shall be filed and the tax paid on or before the 25th day of the following month following the quarter in
which the fringe benefits were granted to the recipients.
It shall be filed and the tax paid with the Authorized Agent Bank (AAB), of the Revenue District Office (RDO) having
jurisdiction over the withholding agent’s place of business/office.
In places where there are no. AAB, the return shall be filed and the tax paid with the RDO or the duly Authorized City or Municipal
Treasurer of the RDO having jurisdiction over the withholding agent’s place of business/office, who will issue a Revenue Official
Receipt (BIR form No. 2524) therefor.
Where the return is filed with an AAB, the lower portion of the return must be properly machine-validated and duly
stamped by the AAB to serve as the receipt of payment. The machine validation shall reflect the date of payment, amount paid
and transaction code, and the stamped mark shall show the name of the bank, branch code, teller’s code, and teller’s initial.
The AAB shall also issue an official receipt or bank debit advice or credit document, whichever is applicable, as additional
proof of payment. A taxpayer may file a separate return for the head office and for each branch or place of business/office or a
consolidated return for the head office and all the branches/officers except in case of large taxpayers where only one consolidated
return is required.

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FRINGE BENEFIT OF NRA(NETB)

2. Value of benefit 120,000

FILING OF TAX RETURNS

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