BIR Ruling [DA-170-04]

April 6, 2004 BIR RULING [DA-170-04] 33; DA-11-97 Sony Life Insurance (Phils.) Corp. 21/F, The Petron MegaPlaza 358 Sen. Gil Puyat Avenue Makati City Attention: Ms. Janet B. Sagandoy Accounting Specialist Accounting Department Gentlemen : This refers to your letter dated July 9, 2001 referred to this Office on July 13, 2001 by the Assistant Commissioner, Collection Service, requesting for a ruling on the following: (1) Whether or not the housing loans given to its officers, either financed by the bank or the company, is subject to the fringe benefits tax . A: The computation of the fringe benefits tax in a situation where the company provides its officers with a housing loan would entail (a) valuation of the benefit granted and (b) determination of the proportion or percentage of the benefit which is subject to the fringe benefit tax. Accordingly, the monetary value of the fringe benefit shall be the entire value of the benefit regardless of whether the house is used by the officer partly for his personal purpose and partly for the benefit of his employer pursuant to Section 2.33 of Revenue Regulations (Rev. Regs.) No. 3-98, as amended by Rev. Regs. No. 8-2000 and 10-2000. The value of the benefit is the portion of the amount of the purchase price of the house which amount is shouldered by the employer. On the other hand, where the employer lends money to his employee for his housing loan at a rate lower than twelve percent (12%), the difference of the interest assumed by the employee and the rate of twelve percent (12%) shall be treated as a taxable fringe benefit pursuant to Section 2.33 of Rev. Regs. No. 3-98. ( BIR Ruling No. DA-11-97 dated August 28, 2000 ) Fringe benefits means any goods, service or other benefit furnished or granted by an employer in cash or in kind, in addition to basic salaries, to an employee (except, rank and file employee) such as housing benefit. Section 33 (a) of Republic Act No. 8424 stipulates that fringe 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, where the house is required by the nature of, or necessary to the trade, business or profession of the employer, or is for the convenience or advantage of the employer, the benefit shall not be subject to the fringe benefit tax pursuant to Section 33 of the Tax Code of 1997. The benefits given to the employees provided that the same fall under the definition of ordinary and necessary business expense as those enumerated under Section 34(A)(1)(a)(i) of the same Tax Code, are considered as valid deductible expenses of the Company. (2) The manner of computing the fringe benefit tax (FBT) . A: In general, the computation of the FBT would entail (a) valuation of the benefit granted and (b) determination of the proportion or percentage of the benefit which is subject to the FBT. Where the fringe benefit is granted in money or is directly paid for by the employer, as in your case, then the value is the amount granted or paid for pursuant to Rev. Reg. No. 3-98, as amended by Rev. Regs. No. 8-2000 and 10-2000. CIScaA The grossed-up monetary value of the fringe benefit shall be determined by dividing the monetary value of the fringe benefit by 68%. 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. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group