The Intercompany Cost Plus Agreement is essential for formalizing service arrangements between related entities in the Philippines, ensuring compliance with local transfer pricing regulations and tax requirements. This document is typically used when one company within a corporate group provides services to another related company, with costs being charged along with an agreed markup percentage. The agreement must align with Philippine transfer pricing guidelines, particularly Revenue Regulations No. 2-2013, and satisfy Bureau of Internal Revenue (BIR) documentation requirements. It's particularly crucial for multinational companies operating in the Philippines and local corporate groups seeking to establish clear, tax-compliant internal service arrangements. The document includes detailed cost calculation methodologies, service specifications, and compliance procedures to withstand regulatory scrutiny.
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1. Parties: Identification of the service provider and service recipient, including complete corporate details
2. Background: Context of the agreement, relationship between the parties, and general purpose of the arrangement
3. Definitions: Definitions of key terms used throughout the agreement, including 'Costs', 'Mark-up', 'Services', etc.
4. Scope of Services: Detailed description of services to be provided under the agreement
5. Cost Calculation and Mark-up: Methodology for calculating costs and determining the mark-up percentage
6. Service Standards: Expected quality and performance standards for the services
7. Payment Terms: Terms and conditions for payment, including currency, timing, and payment method
8. Documentation and Records: Requirements for maintaining proper documentation to support the cost plus arrangement
9. Transfer Pricing Compliance: Provisions ensuring compliance with Philippine transfer pricing regulations
10. Audit Rights: Rights of parties and tax authorities to audit records related to the agreement
11. Term and Termination: Duration of the agreement and circumstances for termination
12. Confidentiality: Provisions protecting confidential information exchanged under the agreement
13. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction for disputes
14. General Provisions: Standard boilerplate clauses including notices, amendments, and severability
1. Force Majeure: Included when parties want specific provisions for handling unforeseen circumstances
2. Intellectual Property Rights: Required when services involve creation or use of intellectual property
3. Data Protection: Necessary when services involve processing of personal or sensitive data
4. Service Level Agreement: Added when specific performance metrics need to be measured and maintained
5. Dispute Resolution: Optional detailed procedures for resolving disputes, such as mediation before litigation
6. Insurance: Included when specific insurance coverage requirements are needed
7. Compliance with Anti-Corruption Laws: Added when transactions involve high-risk activities or jurisdictions
8. Change Control Procedure: Included when services are likely to require frequent modifications
1. Schedule A - Detailed Service Description: Comprehensive list and description of all services covered by the agreement
2. Schedule B - Cost Components: Detailed breakdown of cost components and calculation methodology
3. Schedule C - Mark-up Calculation: Specific formula and benchmarking data supporting the mark-up percentage
4. Schedule D - Service Levels: Detailed performance metrics and service level requirements
5. Schedule E - Approved Personnel: List of key personnel authorized to provide services (if applicable)
6. Schedule F - Documentation Requirements: Specific requirements for documentation and reporting
7. Appendix 1 - Transfer Pricing Study: Summary of transfer pricing analysis supporting the arrangement
8. Appendix 2 - Invoicing Template: Standard format for invoices and supporting documentation
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