A law firm’s tax workflow should connect the engagement, invoice, payment, and accounting record. The biggest practical mistake is treating those as four unrelated documents. The next is continuing to use an old “official receipt” process without checking the Ease of Paying Taxes reforms.
Republic Act No. 11976 introduced EOPT changes, including invoice-centered documentation for sales of services. BIR Revenue Regulations No. 11-2024 clarify the treatment of official receipts and their conversion. An unconverted official receipt is a supplementary document, not automatically the primary invoice required for the sale.
Determine the firm’s tax treatment first
Have the accountant confirm the firm’s legal form, BIR registration, VAT or non-VAT status, applicable thresholds and elections, and filing obligations. Do not copy another firm’s invoice just because both practices provide legal services.
Legal services are not generally exempt simply because they are professional services. A VAT-registered firm ordinarily applies 12% VAT to taxable domestic services, subject to the specific law and facts. Confirm the treatment of each transaction, including any claimed exemption or zero rating.
Distinguish the documents in the payment trail
Do not imply that a payment screenshot substitutes for the firm’s invoice. Conversely, do not mark an invoice paid solely because it was issued. These events can occur at different times.
| Document or record | Office purpose |
|---|---|
| Engagement letter | Defines fee basis, scope, tax treatment, and expense arrangements |
| BIR-compliant invoice | Documents the sale under the applicable invoicing rules |
| Collection acknowledgment or payment record | Records money received and allocation |
| Withholding certificate, where applicable | Supports reconciliation of tax withheld |
| Expense or client-fund ledger | Explains advances, disbursements, and balances |
Show the fee, tax, and payment allocation clearly
Use an invoice reference on the payment request and capture the client’s allocation when one transfer covers several matters. Ask the accountant to confirm which reimbursed expenses form part of taxable sales and which funds are genuinely held for a client purpose.
For an arithmetic illustration only, a ₱10,000 fee exclusive of 12% VAT produces ₱1,200 VAT and a ₱11,200 invoice total before any applicable withholding or other adjustment. A VAT-inclusive quotation needs a different breakdown. State the quotation basis in the engagement so that the invoice does not surprise the client.
Reconcile withholding rather than writing off a difference
If a client pays less than the invoice total because tax was withheld, record the cash and the withholding separately. Request and match the relevant certificate instead of treating every short payment as a discount.
A useful reconciliation row includes invoice number, gross amount, VAT treatment, tax withheld, cash received, certificate status, payment fees, and balance. Let the accountant determine the correct tax rate and documentation; office staff should capture the facts accurately.
Run a monthly billing close
Ask the accountant to review the actual invoice template and billing process before rollout. This guide is an operations checklist, not a claim that a particular software-generated document is BIR-authorized. No CPA co-author or professional review is represented here.
- •Match issued invoices to engagements and matters.
- •Compare bank and payment-provider settlements with recorded collections.
- •List missing withholding certificates and unresolved short payments.
- •Review client advances separately from earned fees.
- •Confirm invoice numbering, required details, and system authorization with the accountant.
- •Assign corrections and preserve the supporting records.
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Frequently asked questions
Can a law firm rely on an old official receipt as its invoice?
Not automatically. Check current BIR rules on invoices and any valid conversion of unused receipts. Unconverted receipts generally serve as supplementary documents.
Are all attorney’s fees quoted inclusive of VAT?
No. The engagement should state whether a quoted amount includes VAT where applicable. The correct treatment depends on the firm’s registration and transaction.
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