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:
- Calculate Tax on Salary
- 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 |