Accounting Services Agreement (Philippines)

An Accounting Services Agreement in the Philippines governs the supply of professional services, fixing the fee, the standard of performance expected and how either side may end the engagement.

The Philippine Accountancy Act (Republic Act No. 9298) regulates the practice of accounting in the Philippines, establishing that only CPAs licensed by the Professional Regulation Commission (PRC) and registered with the Board of Accountancy (BOA) may use the CPA title and practice public accountancy, including the preparation of audited financial statements. Accounting firms engaged in public accountancy must be registered as Partnerships or Corporations with at least one managing partner or officer who is a CPA, and must be accredited by the BOA and the Securities and Exchange Commission (SEC) for audit engagements.

The Bureau of Internal Revenue (BIR) imposes specific requirements on accounting service providers. CPAs and accounting firms must issue BIR-registered Official Receipts for professional fees. Clients who are withholding agents must withhold expanded withholding tax at 15% from accounting and bookkeeping service fees under Revenue Regulations No. 2-98. For auditing services, the withholding rate is 15% regardless of income level.

Confidentiality is a cardinal obligation of CPAs under the Philippine Accountancy Act (RA 9298) and the Code of Ethics for Professional Accountants in the Philippines adopted by the BOA under Board Resolution No. 2012-01, which mirrors the International Federation of Accountants (IFAC) Code of Ethics. CPAs are prohibited from disclosing client financial information without client consent, except where disclosure is required by law or a court order.

For accounting engagements involving the preparation of audited financial statements for SEC-registered corporations or publicly-listed companies, the SEC Memorandum Circular No. 9-2019 (Revised SRC Rule 68) prescribes the format of financial statements and the audit standards applicable, referencing Philippine Standards on Auditing (PSAs) issued by the Auditing and Assurance Standards Council (AASC).

The legal framework governing the Accounting Services Agreement (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Accounting Services Agreement (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Revised Corporation Code (RA 11232, 2019) sets the foundational requirements.

An Accounting Services Agreement in the Philippines is needed whenever a CPA, accounting firm, or bookkeeping service provider undertakes to provide accounting, tax, or financial services to a client for a fee.

An Accounting Services Agreement is required when a startup company or small and medium enterprise (SME) engages an external accountant or bookkeeping firm to maintain books of accounts and prepare monthly financial statements. Under the Tax Code (NIRC) and BIR Revenue Regulations No. 9-2009, all businesses are required to maintain books of accounts registered with the BIR — a written agreement documents the accountant's responsibility for this compliance function.

An Accounting Services Agreement is needed when a corporation required to file audited financial statements with the SEC engages an independent auditor under the Philippine Accountancy Act (RA 9298). SEC-registered corporations with paid-up capital of PHP 50,000 or more must file audited financial statements with the SEC under Section 75 of the Corporation Code (Republic Act No. 11232, the Revised Corporation Code).

An Accounting Services Agreement is required when a business engages a CPA or accounting firm for BIR tax compliance services — preparation and filing of income tax returns (BIR Form 1701, 1702), VAT returns (BIR Form 2550M, 2550Q), withholding tax returns (BIR Form 1601-C), and coordination of BIR examinations or Letter of Authority (LOA) audits.

An Accounting Services Agreement is needed when an employer outsources payroll processing to an accounting firm, requiring the firm to compute employee salaries, statutory deductions (SSS, PhilHealth, Pag-IBIG, withholding tax), and prepare BIR Alphalist submissions under Revenue Regulations No. 11-2013.

An Accounting Services Agreement is required when a foreign corporation establishing a branch or regional headquarters in the Philippines engages a local accounting firm for SEC registration, BIR registration, and initial financial reporting under PFRS (Philippine Financial Reporting Standards) issued by the Financial Reporting Standards Council (FRSC).

A valid Accounting Services Agreement in the Philippines must contain the following essential elements to be enforceable under the Civil Code and to properly define the accountant's professional obligations under the Philippine Accountancy Act (RA 9298).

Parties and CPA Credentials: Full legal names of the CPA or accounting firm (with PRC License Number, BOA Accreditation Number, and SEC Accreditation Number for audit engagements) and the client (with BIR TIN, SEC Registration or DTI Business Name, and business address). Confirming CPA credentials in the agreement protects the client from engaging unqualified practitioners.

Scope of Accounting Services: A specific enumeration of services — monthly bookkeeping, financial statement preparation (balance sheet, income statement, cash flow statement per PFRS), BIR tax filing services (listing specific BIR forms and filing periods), payroll processing, internal audit, external audit, management advisory services. Ambiguous scope like 'full accounting services' leads to disputes about whether specific services are included.

Client Responsibilities: The client's obligation to provide complete, accurate, and timely source documents — official receipts, purchase invoices, bank statements, payroll records — within an agreed deadline each month. The accountant cannot be held liable for errors or penalties caused by the client's failure to provide complete documents on time.

Professional Fee and Payment: The monthly retainer or per-engagement fee in PHP ₱, the payment schedule, and tax provisions — including 15% expanded withholding tax at source under Revenue Regulations No. 2-98 and VAT if the firm's annual gross receipts exceed PHP 3,000,000.

Penalties and Surcharges: An express allocation of liability for BIR surcharges, interest, and compromise penalties arising from late filing or payment. Standard Philippine practice is that the accountant bears liability only for penalties caused by the accountant's negligence, not for penalties caused by the client's failure to timely provide funds or documents.

Confidentiality: The accountant's obligation to maintain client financial information confidential under the Philippine Accountancy Act (RA 9298) and the Code of Ethics for Professional Accountants, for the duration of the engagement and for a specified period after termination.

Termination and Document Return: The procedure for terminating the engagement, the accountant's obligation to return original client documents and provide transition documents to a successor accountant upon termination, and the client's obligation to pay outstanding fees before document return.

Additional compliance elements for a Accounting Services Agreement (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.