Income from compensation

1. Select the correct statement.

Separation benefits are exempt if the termination if due to any cause beyond the control
of the employee.
2. Which of the following items is not part of the gross compensation income?
Fringe benefits
3. Which statement is wrong? The amount on which the fringe benefit tax rate is applied is:
The monetary value of the fringe benefit.
4. During 2019, taxable year, Northstar Pacific Corp. was able to persuade Alex Bouhashi
to join the company as its Executive Vice-President for Marketing which included a car
plan worth P3,000,000 in its compensation package. Northstar Pacific Corp purchased
the vehicle and registered the same in favor of Mr. Bouhashi. Assuming further that Mr.
Bouhashi is a non- resident alien not engage in trade or business, how much, is the
fringe benefit tax?
P1,000,000
5. Which of the following is subject to final fringe benefit tax?
Vehicle granted by the company to an employee for work and personal use
6. Statement 1: The fringe benefit tax is deductible from the gross income of the employer.
Statement 2: The fringe benefit tax is withheld by the employer.
Both statements are true.
7. Which of the following statement is most correct?
The fringe benefits are exempt from tax and can be deducted even without withholding
tax.
8. Select the correct statement.
Separation benefits are exempt if the termination if due to any cause beyond the control
of the employee.
9. Which of the following is subject to fringe benefit tax?
Fringe benefit of the managerial employees
10. On January 1, 2014, Helen invested P1,000,000 to RCBC Commercial Bank's 5-year,
tax-free time deposit. The long-term deposit pays 15% annual interest every January 1.
In need of cash, Helen pre-terminated her investment on July 1, 2017. How much is the
final tax due and the proceeds of Helen's investment?
P63,000; P1,012,000
11. Which of the following statements is correct?
Fringe benefits may be given to managerial, supervisory and rank-and-file employees.
12. In 2007, A Corporation allowed its Sales Manager to incur expenses subject to
reimbursement, as follows:
 The amount subject to fringe benefits tax is
P16,600
13. The following fringe benefits are not subject to fringe benefit tax, except
If given for the convenience or advantage of the employee
14. The 2010 books of accounts of DBest Company showed the following:
Fringe benefit expense P1,550,000
Fringe benefit tax expense 332,000
Compute the monetary value of fringe benefit given to managers and supervisors.

P705,500
15. n 2017, ABC Corp. hired Ms. C. Aquino as sales manager for cosmetics. In accordance
with her conditions for employment, she was given the following compensation and
fringe benefit:

The fringe benefit tax due is

P192,565
16. Which of the following statement is most correct?
The fringe benefits are exempt from tax and can be deducted even without withholding
tax.
17. The grossed-up monetary value of fringe benefit subject to fringe benefit tax received by
a non- resident alien individual engaged in trade or business in the Philippines is
computed by dividing the monetary value of the fringe benefit by
75%
18. The following data for the year 2010 of a resident rank-and-file employee who has four
qualified dependent children are made available:
 Compute the tax-exempt de minimis benefits.

45,600
19. Which of the following benefits received by a bank executive is subject to fringe benefit
tax?
Both a and b.
20. The 2017 books of accounts of Delight Company showed the following:
Fringe benefit expense P1,550,000
Fringe benefit tax expense 332,000
Compute the gross-up monetary value of fringe benefit given to managers and
supervisors.
P1,037,500
21. There are 30 employees in a manufacturing firm consisting of 20 rank-and-file
employees and 10 supervisory employees. The manufacturing firm terminated its
employees and gave fringe benefits equivalent to P 10,000 per rank-and-file employee
and P 20,000 per supervisory employee based on a duly executed collected bargaining
agreement (CBA)? Which of the following statements is most correct?
Rank-and-file employees are not subject to fringe benefit tax.
22. The following were received by a resident citizen employee, married, and with four
qualified dependent children for the year 2009: Salary (net of P20,000 withholding tax,
P3,000 SSS contribution; P2,000 union dues), P275,000; 13th month pay, P25,000; 14th
month pay, P25,000. How much was the taxable compensation income?
P165,000
23. The 2010 books of accounts of DBest Company showed the following:
Fringe benefit expense P1,550,000
Fringe benefit tax expense 332,000
Compute the total deductible amount against gross income of DBest Company.
 P1,882,000
24. Alpha Zetta, Inc. established in the Philippines provided its employees cash and
non-cash fringe benefits in 2017 as follow:

Compute the total fringe benefit tax expense of Alpha Zetta, Inc.P238,824
P145,490
25. Which income is taxable in the Philippines?
Salaries of resident citizens for services rendered to consular offices of foreign
governments
26. The following concepts denote exemption from the fringe benefits tax, except
Welfare and benefits of the employee
27. Angel is a cash basis self-employed air-conditioning repairman with 2016 gross business
receipts of P200,000. Angel's cash disbursements were as follows:

What amount should Angel report as self-employment income before personal

exemption?

P149,000
28. The following data for the year 2010 of a resident rank-and-file employee who has four
qualified dependent children are made available:
 Compute the tax-exempt de minimis benefits.

P45,600
29. In 2010, ABC Corp. paid for the annual rental of a residential house used by its general
manager amounting to P106 ,250. The entry to record the benefit is:

Fringe Benefit Expense P 106,250

Fringe Benefit Tax Expense 25,000
Cash P 131,250

30. Which of the following statements relative to the nature of final fringe benefit tax is true?
The employer may claim the grossed-up monetary value of the fringe benefit as a
deductible expense.
31. Znneth Company made the following payments in the 3rd quarter of 2017:
Fringe benefits:

Determine the fringe benefit tax due.

P19,412
32. Basic rules on fringe benefits tax, except
The fringe benefit tax is a tax paid by the managerial or supervisory employee
33. Which of these benefits granted to a managerial employee by the employer is subject to
the final fringe benefit tax?
Scholarship grant given by an instant-noodle manufacturing corporation to its manager
taking up Masters in Public Administration at Liceo de Cagayan University.
34. Statement 1: A fringe benefit which is subject to the fringe benefit tax is taxable income
of the employee.
Statement 2: A fringe benefit which is not subject to the fringe benefit tax is taxable
income of the employee.

First statement is false while second statement is true.

35. As a rule, fringe benefit furnished or granted in cash or in kind by an employer to an
individual employee maybe subject to the fringe benefit tax, if given to
A.) Rank and file employees
B.) Managerial employees
C.) Those holding supervisory positions

Only B and C
36. Raquel Ceralde was retired by her employer-corporation in 2016 and was paid
P2,000,000 as a retirement gratuity without any deduction of withholding tax. The
corporation became bankrupt in 2017. Can the BIR subject the P2,000,000 retirement
gratuity to income tax?
1st Answer: No, if the retirement gratuity was paid based on a reasonable pension plan
where Ceralde was 60 years old and has served the corporation for 9 years.
2nd Answer: Yes, if Ceralde was forced by the corporation to resign due to
retrenchment.

First answer is wrong; the second is correct.

37. Which of the following de minimis benefits exceeds the limitations provided by law?
Air-conditioner worth P20,000 given on account of the employee's giving birth to her first-
born child
38. Which of the following fringe benefit is not subject to the fringe benefits tax?
Contributions of the employer for the benefit of the employee to retirement, insurance
and hospitalization benefit plans.
39. The fringe benefit tax is
A.) Imposed on the employer
B.) Withheld at source
C.) Deductible by the employer
A, B and C
40. Facilities or privileges furnished or offered by an employer to his employees that are of
relatively small value and are offered or furnished by the employer merely as a means of
promoting the health, goodwill, contentment, or efficiency of his employees.

De minimis benefit
41. The 2023 books of accounts of Delight Company showed the following:
 Fringe benefit expense P1,550,000
Fringe benefit tax expense 332,000
Compute the value of fringe benefit given to rank and file employees.

P844,500
42. Which of these items shall form part of the gross compensation income of an employee?
None of the foregoing.
43. Miss Lopez had recently joined the MMC as sales executive. She was advised to be
retrenched because the company was losing heavily, but that she would be given a
substantial separation pay. The general manager, however, suggested to Miss Lopez to
file a letter of resignation from the company, instead of having been involuntarily
separated as the latter would have implications of inefficiency on her part. Miss Lopez
chose to resign from the company and received the sum of P100,000 as separation pay.
The above amount is
Taxable in full
44. Which of the following is subject to the final fringe benefit tax?
None of the foregoing
45. As a means of promoting the health, goodwill and efficiency of his employees, employer
A gave rank and file employee B the following fringe benefits in 2009:

The employer's deductions for the benefits given

P84,000
46. During 2017, Mrs. Imelda Juanito retired from her job at Golden Manpower Services, Inc.
She joined Golden Manpower Services, Inc. in 2001, when she was 38 years old, until
2010; resigned in 2010 but returned to the company's employ in 2012. Golden
Manpower Services, Inc. maintains a reasonable private benefit plan which is also
approved by the BIR. This was her first time availment of retirement benefit exemption.
Is the retirement benefit taxable?
No, because all conditions have been complied with
47. Which of the following items that reduce salaries of employees is not an exclusions from
gross income?
IOU's.
48. Which statement is wrong? The fringe benefit tax is:
 Imposed on the employee.
49. Mr. A is a mining engineer employed by B Co., a mining firm. The company's mine is in
Mountain. Trail. Mr. A was provided by the Company with living quarters at the mine site.
The fair rental value of the living quarters is P15,000 a month. Determine the quarterly
fringe benefit tax due.

РО
50. The following data for the year 2010 of a resident rank-and- file employee who has four
qualified dependent children are made available:

Compute the total exclusions/exemptions (including de minimis benefits).

P231,500
51. As a means of promoting the health, goodwill and efficiency of his employees, employer
A gave rank and file employee B the following fringe benefits in 2009:

The amount of taxable fringe benefit is

P11,000
52. The following fringe benefits are not subject to fringe benefits tax, except:
 Fringe benefits furnished or granted by the employer to its managerial and supervisory
employees.
53. With regard to the amount on which the fringe benefit tax rate is applied, which
statement is wrong? The tax benefit rate is applied on
The monetary value of the fringe benefit
54. ABC, Inc. established in the Philippines provided its employees cash and non-cash
fringe benefits in 2009 as follow:

Compute the total deductible fringe benefit expense.

P1,145,490
55. Which statement is wrong? The fringe benefit tax is
Imposed on the managerial or supervisory employee
56. After resigning in 2017, Mrs. Imelda Juanito immediately joined another company with a
reasonable pension plan but she was terminated in 2018 due to retrenchment. Is the
separation pay exempt?
Yes, because the underlying reason of her resignation was beyond her control.
57. The following information belong to RUNDAY Corp. for the year 2011:

The fringe benefit tax due is:

P 75,294
58. An employee's payroll record showed the following information for the taxable year
200A:
 The total gross compensation income of the employee that shall be subject to income
tax for the taxable year 200A amounts to:
P 242,000
59. Which of the following is considered fringe benefits?

Housing benefits given by the government to its public managerial officers.

60.