In: Accounting
Please show the solution
1. In 2019, Annyeong Corporation gave the following
fringe benefits to its employees
To managerial
employees
P1,360,000
To rank and file
employees
5,000,000
The allowable deduction from the gross income of the corporation
for the fringe benefits given to employees is___________
2.
From a managerial employee for taxable year 2019:
Salaries and wages (net of SSS and medicare amounting to P6,000
and Withholding tax of
P26,000)
P354,000
Allowance, not subject to liquidation 48,000
Gasoline allowance, subject to liquidation 30,000
13th month
pay
20,000
The fringe benefit tax due from the above benefit is
________________
1) Fringe benefits to rank and file employees is not taxable. However these are treated as normal income and taxed accordingly. However fringe benegits paid to managerial employees are considered for tax purposes.
The amount of expense shall be grossed up (GMV) factor of 68%.
So the amount to be considered for fringe benefit tax
Rank and file = 0 (exempt)
Managerial = 1,360,000
Total amount = 1,360,000
Grossed up value = 1,360,000/68%
= 2,000,000
Tax amount shall be computed at 32% of the grossed up value
Tax = 2,000,000*32%
Fringe benefit tax = 6,40,000
Amount of deduction = cash expense paid as benefit + Tax amount
= 1,360,000 + 640,000
= 2,000,000
2) Salary(including 13th month pay) and medical SSS are not part of fringe benefit tax. Only allowances are included in as fringe benefits.
Allowances paid = 48000 + 30,000
= 78,000
Grossing up = 78,000/68% = 114,705
Tax amount = 114,705*32%
Fringe benefit Tax amount = 36,705