CPA REVIEW CENTER

TAX00 – FRINGE BENEFIT TAX

1. Identify whether or not the following are subject to fringe benefits tax:

a. Fringe benefit required by the nature of or necessary to trade or business of the employer
b. Fringe benefit for the convenience or advantage of the employer
c. Fringe benefit given to rank and file employees
d. Housing privilege of the AFP
e. Housing units situated inside or adjacent to business or factory (located within 30 meters
from the perimeter of the business)
f. Temporary housing for an employee who stays in the housing unit for 3 months or less
g. Representation and entertainment allowances which are fixed in amount and regularly
received by employee
h. Use by employee of aircraft (including helicopters) owned and maintained by the employer
i. Cost of economy and business class airplane ticket for foreign travel
j. De minim.is benefits
k. Educational assistance granted to employees' dependents through competitive scheµie
under scholarship program of the company. ·
l. Cost of premiums borne by the employer for the group insurance of his employees
m. Contribution of employer for the benefit of employee under SSS and GSIS laws
n. Contributions of the employer for the benefit of the employee to retirement, insurance and
hospitalization benefit plan.

2. If a friend inquires whether or not the cost of education to the assistance to the employee
and/or his dependents which are borne by the employer be taxable. What will your answer
be?

First Answer – A scholarship grant to the employee by the employer shall not be treated as
taxable fringe benefit if the education or study involved is directly connected with the
employer’s trade, business or profession and there is a written contract between them that
the employee is under obligation to remain in the employ of the employer for a period of
time that they have mutually agreed upon.
Second Answer – The cost of education assistance extended by an employer to the
dependents of an employee shall be treated as taxable fringe benefits of the employee
unless the assistance was provided through a competitive scheme under the scholarship
program of the company.
a. True, True b. True, False c. False, True d. False, False

3. 1st Statement – Monetized unused vacation leave credits not exceeding 10 days is an
exempt de minimis benefit.
2nd Statement – Daily meal allowance for overtime work not exceeding twenty-five (25%)
percent of the basic minimum wage is exempt fringe benefit.
a. True, true b. False, true c. True, false d. False, false

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4. The Fringe benefit tax is
i. Imposed on the employer
ii. Withheld at source
iii. Deductible expense by the employee

a. Only A and B
b. Only A and C
c. Only B and C
d. A,B, and C

5. The following are not taxable, except

a. Refund of fringe benefit tax
b. Refund of Philippine income tax
c. Refund of estate or donor’s tax
d. Refund of special assessment

6. Which is wrong? The tax benefit rate is applied on

a. The monetary value of the fringe benefit
b. The gross up monetary value of the benefit
c. The amount deductible by the employer from gross income
d. Both the amounts of fringe benefit and fringe benefit tax

7. The determination of the fringe benefit tax would entail the following, except
a. Valuation of the fringe benefit.
b. Determination of the percentage of the benefit subject to the fringe benefit tax.
c. Determination of the manner by which the fringe benefit has been utilized by the
employee.
d. Determination of the grossed-up monetary value of the fringe benefit.

8. The monetary value of fringe benefit if given in money is

a. Fair market value (BIR) or zonal value whichever is higher.
b. Amount granted.
c. Depreciated value.
d. Acquisition cost plus other incidental costs.

9. Which value should be used as tax base to compute the fringe benefit on the property
assigned for the use of employees?
a. Fair market value of the property.
b. Cost of the property.
c. Equivalent rental value of the property.
d. Fringe benefit value.

10. For property assigned for use of employee, the excess of fair market value over cost of the
property assigned should be
a. Amortized over the original life of the property.
b. Depreciated over the original life of the property.
c. Amortized over the remaining useful life of the property.
d. Depreciated over the remaining useful life of the property.

11. The following are nontaxable housing fringe benefit, except

a. Housing for military official of the armed forces of the Philippines.
b. Housing within 50 meters of business premises.
c. Temporary housing within three months or more.
d. Free housing privilege to a corporate officer.

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12. If residential property is purchased and title of ownership is transferred in the name of the
employees, the monetary value of such property of fringe benefit is the
a. Higher of fair market value or zonal value.
b. Acquisition cost exclusive of interest.
c. Five percent of fair market value.
d. Fifty percent of the acquisition cost.

13. The following items are treated as taxable fringe benefit, except
a. Expenses incurred by the employee paid by the employer.
b. Expenses incurred attributable to business of employer paid by the employer.
c. Personal expenses without receipt of the employee reimbursed by the employer.
d. Representation and transportation allowances which are variable in amount and not
part of compensation income.

14. Interest on loans granted by employer to employee are taxable fringe benefit when the
interest rate is
a. Above 12%
b. Lower than 6%
c. 18% and above
d. Lower than 12%

15. Statement 1: Nonpayment of FBT will result to disallowance of deductible fringe benefit
expense.
Statement 2: All compensation income of a managerial employee is subject to FBT.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

16. Which of the following fringe benefits received by a managerial employee is taxable with
final income tax?
a. De minimis
b. Free housing
c. Educational scholarship
d. Foreign travel on account of business conversation

17. Nico, Vice-President of JJ Super Fit Corporation was given a car by his employer, Mr. JJ Trinidad.
The cost of the car given to Nico was P900,000. The fringe benefits tax that Nico is required to
pay is:
a. P423,529 c. P900,000
b. P288,000 d. P0

Mr. Alegre, a manager of Jollimac, received the following fringe benefits during the taxable year:

Cash travel allowance P 34, 000

House and lot-ownership of real property is transferred
to Mr. Alegre, FMV, P544, 00) cost 476, 000
Car-ownership was transferred to Mr. Alegre.
The car has a 10-year estimated useful life, but
Already 1 year in use at date of transfer 680, 000

18. The monetary value of fringe benefits received during the year would be
a. P1, 258, 000. c. P646, 000.
b. P1, 190, 000. d. P578, 000.

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19. The grossed-up monetary value of fringe benefits would be
a. P850, 000. c. P1, 750, 000.
b. P950, 000. d. P1, 850, 000.

An employer remitted to BIR P80, 000 pertaining to amount withheld from the cash benefit granted to
its managerial employee.

20. How much is the monetary value of fringe benefit paid to managerial employee?
a. P330, 000 c. P170, 000
b. P250, 000 d. P 80, 000

21. How much is the grossed-up monetary value of fringe benefit?

a. P330, 000 c. P170, 000
b. P250, 000 d. P 80, 000
22. The income tax expense deductible from the business income of the employer for this
particular payment is
a. P80, 000. c. P25, 600.
b. P54, 000 d. P-0-

23. X Corporation paid P136, 000 cash fringe benefit for year 200A representing 80% of the car
incentive for its area manager. X remitted the related final tax of the said cash fringe benefit.
The amount to be claimed as business deduction from business income is
a. P170, 000. c. P136, 000.
b. P200, 000. d. P108, 800.

24. EGV partnership withheld P19, 200 from the fringe benefit granted to its office manager.
Pertaining to the amount of tax withheld, how much would be the tax expense that the office
manager could deduct from his gross compensation income?
a. P-0-. c. P19, 200.
b. P 6, 144. d. P60, 000.

X Corporation purchased a residential property with a zonal value of P5, 000, 000. The property
has a fair market value of P6, 000, 000.

25. If the property was assigned for the use of X Co.’s president, how much is the fringe benefit tax?
a. P70, 588 c. P48, 000
b. 58, 824 d. P40, 000

26. If the property was acquired for the use of X Co.’s manager for P2, 000, 000 down payment and
P1, 000, 000 on instalment basis per year in 4 years (with nan effective interest rate of 12% per
year), how much is the fringe benefit tax?
a. P70, 588 c. P58, 824
b. P59, 258 d. P35, 294

27. Gerry, the chairman of the board, presented the following expense accounts which were
reimbursed to him by his employer, U Corporation:
Monthly representation allowance P30, 600
Grocery Items 17, 000
Pants and T-shirt 3, 400
Gasoline of company car 6, 800

The fringe benefit tax would be

a. P27, 200. c. P20, 400.
b. P24, 000. d. P 9, 600.

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28. Leah Salonga, a resident Filipino, is employed as a manager of a regional operating
headquarters of Walmart Multinational Corporation here in the Philippines. Her position is
normally occupied only by expatriate. She received P170,000 cash as fringe benefits. The fringe
benefit tax would be
a. P80,000 c. P37,500
b. P62,500 d. P30,000

In 200A, Miss Chita de Vera, a branch manager of PCI Bank, was given fringe benefits as follows.
 Assignment of a condominium owned by the bank. The prevailing rent of the same class of
condominium of P40,000 per month. The fair market value of the condominium is P4,000,000
per BIR valuation and the zonal valuation is P5,000,000.
 A brand new car purchased by the company is in the name of Miss de Vera. The company
purchased the car by annual installment of P200,000 in four consecutive years after giving a
down payment if P50,000. The cash price is P500,000.
 A P10,000 cash representing transportation and representation expense as fixed amount and
considered part of Miss de Vera’s compensation income.

Required: Compute for the following:

29. Monetary value of fringe benefit on condominium.
30. Grossed-up monetary value of condominium.
31. Fringe benefit tax on use of condominium per year.
32. Grossed-up monetary value of the car as fringe benefit.
33. Fringe benefit tax of the car.
34. Grossed up monetary value of cash fringe benefit.
35. Fringe benefit tax of the cash benefit.

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