Question

In: Accounting

Please show the solution 1. In 2019, Annyeong Corporation gave the following fringe benefits to its...

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 ________________

Solutions

Expert Solution

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


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