Cost Allocation Agreement Template for Philippines

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Key Requirements PROMPT example:

Cost Allocation Agreement

"I need a Cost Allocation Agreement for our Philippine manufacturing company and its three local subsidiaries, to be effective from January 2025, covering shared IT infrastructure costs and corporate overhead expenses, with specific attention to transfer pricing compliance."

Document background
A Cost Allocation Agreement is essential when multiple entities share resources, services, or facilities and need a formal structure to divide the associated costs. This document is particularly relevant in the Philippine business context where shared service centers, regional headquarters, and group companies frequently operate. The agreement must comply with Philippine transfer pricing regulations, tax laws, and corporate requirements while establishing clear methodologies for cost allocation. It typically includes detailed schedules for cost categories, allocation keys, and calculation methods, making it crucial for both related party transactions and third-party arrangements. The document should be regularly reviewed to ensure continued compliance with Philippine regulatory requirements and changing business needs.
Suggested Sections

1. Parties: Identification of all participating entities in the cost allocation arrangement

2. Background: Context of the agreement and relationship between the parties

3. Definitions: Detailed definitions of terms used throughout the agreement

4. Purpose and Scope: Clear statement of the agreement's objectives and scope of costs to be allocated

5. Cost Pool Definition: Detailed description of which costs are included in the allocation arrangement

6. Allocation Methodology: Specific methods and formulas used to allocate costs among participants

7. Payment Terms: Timing, currency, and method of payments for allocated costs

8. Record Keeping and Documentation: Requirements for maintaining proper records and supporting documentation

9. Audit Rights: Provisions for reviewing and auditing cost calculations and allocations

10. Term and Termination: Duration of the agreement and conditions for termination

11. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction

12. Dispute Resolution: Procedures for resolving disagreements between parties

13. General Provisions: Standard boilerplate clauses including notices, amendments, and severability

Optional Sections

1. Transfer Pricing Compliance: Additional provisions ensuring compliance with Philippine transfer pricing regulations - required when parties are related entities

2. Tax Responsibilities: Specific provisions regarding tax treatment and responsibilities - include when cross-border elements exist

3. Intellectual Property Rights: Provisions regarding IP ownership and usage - include when shared costs involve IP development

4. Confidentiality: Detailed confidentiality provisions - include when sensitive cost information is shared

5. Force Majeure: Provisions for handling unforeseen circumstances - include when long-term arrangement or critical services involved

6. Insurance Requirements: Insurance obligations of parties - include when physical assets or high-risk activities are involved

Suggested Schedules

1. Schedule A - Cost Categories: Detailed listing and description of all cost categories included in the allocation

2. Schedule B - Allocation Keys: Specific allocation factors and calculations used for different cost categories

3. Schedule C - Participating Entities: Complete list of participating entities and their respective roles/shares

4. Schedule D - Sample Calculations: Examples of how costs will be calculated and allocated

5. Schedule E - Reporting Template: Standard format for periodic cost allocation reports

6. Appendix 1 - Transfer Pricing Documentation: Required documentation to demonstrate compliance with transfer pricing regulations

7. Appendix 2 - Service Level Requirements: Performance standards and metrics related to cost-generating activities

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions
Clauses
Relevant Industries

Manufacturing

Financial Services

Technology

Shared Services

Consumer Goods

Professional Services

Healthcare

Real Estate

Telecommunications

Retail

Energy

Construction

Logistics

Business Process Outsourcing

Relevant Teams

Finance

Legal

Tax

Compliance

Treasury

Accounting

Internal Audit

Corporate Planning

Risk Management

Shared Services

Corporate Development

Relevant Roles

Chief Financial Officer

Finance Director

Corporate Controller

Tax Manager

Legal Counsel

Compliance Officer

Financial Controller

Treasury Manager

Shared Services Director

Group Financial Manager

Transfer Pricing Specialist

Cost Accounting Manager

Corporate Planning Manager

Risk Management Officer

Internal Audit Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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