35% tax on grossed-up fringe benefits.
Fringe benefits tax
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Grossed-up value
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Total employer outlay
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Why the employer pays this tax, not the employee
Fringe benefits tax is one of the more counterintuitive levies the Bureau of Internal Revenue (BIR) administers. When a company gives a managerial or supervisory employee a perk that is not part of regular salary, a housing allowance, a company car for personal use, club memberships, foreign travel, the value of that perk is taxed, but the bill lands on the employer. It is a final tax, settled at source, and the employee never sees it on a return. In exchange, the employer gets to treat both the benefit and the tax as deductible business expenses. This tool computes that final tax from a single input: the monetary value of the benefit you are granting.
The scope matters before you trust the number. FBT applies to benefits given to managerial and supervisory staff. Identical perks handed to rank-and-file employees are not subject to FBT at all, though they may instead count toward the PHP 90,000 ceiling on 13th-month pay and other benefits. If you are pricing a perk for a junior hire, this is the wrong calculator.
The grossing-up step, and why it inflates the value
You cannot simply multiply the benefit by the tax rate. The law treats the perk as a net, after-tax amount and asks what pre-tax figure it corresponds to. That pre-tax figure is the grossed-up monetary value, found by dividing the benefit by 0.65. The tax is then 35 percent of that grossed-up value. The 35 percent rate and the 0.65 divisor are the figures this calculator applies; both flow from the same TRAIN-era design, and you should confirm the current rate and method with the BIR before relying on a filing. Grossing up is what makes the effective cost of a benefit noticeably higher than its face value.
Grossing up a PHP 100,000 perk
Say you grant a managerial employee a benefit with a monetary value of PHP 100,000. Divide by 0.65 and the grossed-up value is PHP 153,846. Apply 35 percent and the fringe benefits tax is PHP 53,846. Here is the detail that trips people up: the total you part with, the PHP 100,000 benefit plus the PHP 53,846 tax, comes to PHP 153,846, the very same number as the grossed-up value. That is not a coincidence. Dividing by 0.65 and adding 35 percent of the result are two ways of describing the identical amount, which is the whole logic of the gross-up.
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The chart shows the total outlay split into the perk the employee enjoys and the tax the employer remits.
The exemptions that keep many perks out of FBT
Not every benefit to a manager triggers the tax, and a common mistake is grossing up perks that the rules already exempt. Benefits required by the nature of the trade or granted for the employer's convenience often fall outside FBT, as do de minimis benefits within the BIR's specific ceilings, small allowances like modest rice subsidies or uniform allowances. Where a de minimis benefit exceeds its ceiling, the excess does not become FBT either; it shifts into the PHP 90,000 other-benefits basket. So before you run a perk through this tool, check whether it is exempt at all. If it is, your FBT is zero and grossing it up overstates the cost.
A practical budgeting tip flows from the gross-up: every PHP 100 of taxable perk costs the company roughly PHP 154 once the tax is layered on. When you weigh a managerial benefit against a straight pay rise, factor that loading in, because the headline value of the perk understates what it actually draws from the business.
Can the company deduct the fringe benefits tax it pays?
Yes. Both the grossed-up value of the benefit and the fringe benefits tax are generally deductible as ordinary business expenses, which softens the blow against corporate income tax. That deductibility is part of why the system is built around the employer remitting a final tax rather than chasing the employee for it. Confirm the deduction treatment for your specific benefit with the BIR or your accountant, since substantiation rules apply.
How is FBT different from the income tax on a salary?
A cash salary is taxed in the employee's own hands at graduated rates and withheld from their pay. A fringe benefit to a manager is instead taxed at the employer level as a flat final tax on a grossed-up value, and it never enters the employee's income tax return. That separation is why a perk and a raise of the same face value carry different total costs, and why this calculator exists as its own tool rather than folding into a payroll computation.