I'm Giancarlo Enrico S. Pozon, a Wushu instructor, investor and Barrister... That's right, Barrister; I graduated from law school and took the Bar Exams, now I'm waiting for the results. I created this blog to make Philippine Law easy to understand for the average person. It's all about free legal advice. There are many law blogs. But the problem is that many of them are written for lawyers and law students. They use words that can't be understood by ordinary people.
Many lawyers, judges and law students consider themselves as superior to most human beings because of their knowledge of the law. It bothers me since the law is supposed to serve society. Since the law is meant to serve society as a whole, it is important that is must be understood by everybody.
This does not mean that we should all become lawyers. It means that although law is a highly specialized profession, the first duty of everybody in this profession is to make the law understandable to all; that's why all these articles are free legal advice.
Like I said, this blog is about law -but it's for the ordinary people, not the lawyers. It's for the ordinary folk so they will know what is good and bad for them, and that making them aware of the law will help us all improve society as a whole. This is free legal advice for everybody!
This is horrible. Fringe and De Minimis benefits are good policy for business people since these benefits are intended to encourage employee loyalty. The whole trouble is the NIRC's provisions on these benefits do not encourage happy and loyal labor.
Fringe Benefits
Fringe Benefits are given to employees above rank-and-file and include housing, vehicles, educational assistance to the employee or his dependents, holiday or vacation expenses, expense accounts, membership fees and dues in social and athletic clubs or similar organizations that are paid for by the employer, interest on loans at less than the market rate to the extent of the difference between the actual rate granted and the market rate (difference between the actual market rate of 12% and the interest rate assumed by the employee,) foreign travel expenses and even life, health and non-life insurance greater than what is prescribed by law. These benefits are taxed at 32% of their gross monetary value. The computation is done this way:
Grossed-up Monetary Value = Monetary Value/68% so:
Fringe Benefit Tax = Grossed-up Monetary Value x 32%
The grossed-up monetary value consists of the net amount of money/monetary property value received and the amount of fringe benefit tax due and paid by the employer on the employee's behalf.
The net monetary value is determined in 2 ways:
1.) If ownership of the property is transferred to the employee, the net monetary value is the fair market value of the property. The fair market value is determined either by the BIR (zonal value) or local assessor, whichever is higher.
2.) If ownership of the property wasn't transferred to the employee, the net monetary value is the property's depreciation value.
De Minimis
These benefits are benefits of a small value granted to rank-and-file employees and are ordinarily not taxed. They include (but aren't limited to) the following:
1.) Monetized unused vacation leaves per year (maximum of 10 days)
2.) Medical cash allowance (maximum of P750/semester or Php125/month)
3.) Rice subsidy (maximum Php1,500/month)
4.) Laundry allowance (maximum of Php300/month)
5.) Actual yearly medical benefits (maximum of Php10,000/year)
6.) Uniform allowance (maximum of Php4,000/year)
5.) Gifts for Christmas and major celebrations (maximum of Php5,000/year)
6.) Daily meal allowance (maximum of 25% of the basic minimum wage)
7.) Employees achievement awards in the form of tangible personal property other than cash or gift certificates with an annual monetary value of Php10,000 maximum
8.) Flowers, fruits, books or similar items given on account of illness, marriage or other special circumstances
9.) Facilities and privileges like entertainment, medical services and "courtesy" discounts on purchases.
If the employee is given benefits that exceed the maximum limits, the excess is added to the 13th month pay, productivity incentives and Christmas bonus. Here's where things get ugly: if the total of the computation is greater than P82,000 (it used to be P30,000 before February of 2015,) it becomes taxable as part of the employee's gross income.
12 comments:
Thank you Mr. Pozon. I do agree with you.
Your employment benefits actually got robbed by the BIR, right?
thank you! this is very enlightening.
geez... i don't really mind paying taxes as long as i and my dependents can take advantage of and not those goddamn crocodiles in the government...
Hello, this blog is quite informative but early last year (2011) BIR issued an RR which made restrictions on De minimis
Giancarlo, can a company just grant 10 vacation leaves to all its employees or there is/are restrictions on granting Vacation leaves?
tnx!
Are De Minimis Benefit be deductible to a basic salary? If Yes, what is the rate? If no, Why the hell is my current employer deducting my de minimis benefit from my basic salary?
(Sorry for the tone) Just asking though...
Thank you Sir!
De Minimis benefits are taxed separately from basic salary because they're not considered part of your salary
As long as the vacation leaves for each employee don't exceed 10 days a year, it won't be taxed.
RRs are considered as simple issuances and can't modify existing laws. In case of a conflict between a law and an issuance (memo, RR, executive order, etc.) the law prevails.
Thanks for sharing info on FBT!
Small Business Tax
Is it updated to train law?
How could you tell if a benefit be taxable and to identify if this belong to fringe benefit or de minimis benefit?
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