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Tax on salary and Fringe Benefit-Example 1

Tax on salary and Fringe Benefit-Example 1

Mr.A is resident employee of ABC Company, below is information of Mr. A for August 2018.

Information in employment contract:

  • Basic salary is $4,000 per month.
  • Cash allowance of $200 per month.
  • Health insurance for his family of $1,400 per annum, but this amount included his health insurance premium of $300 per annum (which is the same as all staff) and his personal car insurance of $100 per annum.
  • Monthly contribution of $1,300 paid by ABC Company into the company’s pension plan. Mr.A will receive this pension fund when he retires or leaves the company.

Other information:

  • Company agreed to provide Mr.A six month advance salary paid directly to his bank account at 1 August 2018. To pay back this salary advance, ABC Company will deduct 20% of his monthly basic salary (which will be paid at 31 August 2018) starting from August 2018 salary until the advance is fully repaid.
  • His wife is a housewife looking after their two children, who are aged seven and ten years old.
  • Apartment rental fee per month for Mr.A is $1,000, but 90% of rental fee is contribution by ABC.
  • Company also provides total educational support for Mr. A’s children of $500 per month.

Assumptions for August 2018:

  • The ToS exchange rate is USD1=KHR 4,100.
  • The average exchange rate is USD1=KHR 4,000.

Residents are taxed at progressive rates as follows:

Salary Tax Calculation Base Range Tax Rate Tax on Salary
0-1,200 ,000 0% 0
1,200 ,001 -2,000 ,000 5% Salary Tax Calculation Base  x 5% – 60,000
2,000 ,001 -8,500,000 10% Salary Tax Calculation Base  x 10% – 160,000
8,500,001 -12 ,500,000 15% Salary Tax Calculation Base  x 15% – 585,000
12 ,500,001 and over 20% Salary Tax Calculation Base  x 20% – 1,210,000


Required:

  1. Calculate Tax on Salary
  2. Calculate Fringe Benefit Tax

Solution

1.Calculate Tax on Salary

Basic Salary                     4,000
Advance Salary ( 4,000 x 6)                   24,000
Cash Allowance                        200
Less: Repayment of advance salary (4,000 x 20%)                       (800)
Total USD                   27,400
Total KHR @ 4,100          112,340,000
Less: rebates for wife and two children ( 3 x 150,000)                (450,000)
Salary Tax Base          111,890,000

111,890,000 KHR > 12 ,500,001 KHR, so tax on salary = Salary Tax Calculation Base x 20% – 1,210,000=111,890,000*20%-1,210,000=21,168,000 KHR

Tax on Salary=21,168,000 KHR

2.Calculate Fringe Benefit Tax

Health Insurance (1,400-300) 1,100
Car Insurance 100
Contribution for apartment rental (1,000 x 90%) 900
Educational support for children 500
Excess pension contribution (1,300-4,000 x 10%) 900
Total Fringe Benefit in USD 3,500
Total fringe benefits in Riel ($1= KHR 4,100)  14,350,000
ToFB rate 20%
Total ToFB liability for August 2018  2,870,000

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