What Changes Between a Service Agreement and a Lease for a 300-Workstation Makati Office

For a 300-workstation office in Makati, the choice between a service agreement and a traditional lease changes who pays for the build, which taxes apply, how PEZA registration works, and what it costs to leave. It does not settle which is cheaper. That depends on how long you stay, how much the fit-out costs and how dense your layout is, and the numbers can flip either way, as the model below shows. This guide sets out what changes, what published sources say, and how to run the comparison with your own quotes.

A workstation is one seat with a desk, chair and computer setup. A service agreement is the contract an operator uses for serviced or managed space, usually one fee per seat. A lease gives you floor area from a landlord, often in bare or warm shell condition. CUSA means common use service area charges. PEZA is the Philippine Economic Zone Authority.

What changes

Legal form

Operators often write these arrangements as service agreements or licenses to use space and services. Whether a document is a lease or a license depends on what it actually provides, and not only on its title, so ask Philippine counsel to review the agreement and do not assume that landlord and tenant rules do not apply. This is a draft for review by counsel.

Tax

VAT. Rent is VAT-able at 12% when the lessor is VAT-registered, and commentary on lease taxes states that CUSA is generally subject to VAT too (respicio.ph, 2026). An operator's fee is also generally invoiced with VAT. Ask whether any figure includes it.

Withholding. Commercial tenants generally withhold 5% creditable withholding tax on gross rent, excluding VAT, and remit it to the BIR (respicio.ph, 7 Mar 2026). It affects cash timing and paperwork, not the cost of the space. Whether it applies to an operator's service fee depends on how the agreement is written, so ask your adviser.

Documentary stamp tax (DST). Section 194 of the Tax Code, as amended by the TRAIN Law, sets DST on a lease at PHP 6 for the first PHP 2,000 of rent and PHP 2 for each PHP 1,000 or fraction above that. The statutory text applies the rate "for each year of the term," although some calculators compute it once on total rent. The contract can say which party pays. Whether DST applies to a license for services is a question for counsel. To see the size of it, take 1,800 sqm at the Leechiu average Makati rent of PHP 891 per sqm per month (BusinessWorld, 20 Jan 2026):

Either way, DST is about PHP 115,000 on a lease with more than PHP 57 million of rent, which is small next to the fit-out. It should not drive the choice.

Accounting. A lease may have to be recognized on your balance sheet under the Philippine accounting standard for leases, while a pure service arrangement may not. Ask your accountant how your agreement would be treated.

PEZA

If you are IT-BPM or shared services and want PEZA incentives, your operations must be located inside a PEZA-registered IT park or building (DEPDev guidelines on registering IT enterprises). Law firm and consultancy guides state that PEZA's application asks for a lease agreement on a PEZA-accredited site, and one states that the workspace must be dedicated to the registered activity and not shared with non-registered entities without prior approval (lawzana.com and korp.ph, 2026). We could not confirm these requirements from PEZA itself. So before you pick a service agreement, ask PEZA in writing:

1. Does PEZA accept a service agreement as proof of location for registration?
2. Must the floor be dedicated to your registered entity, and how is that shown?
3. Does the operator's own registration or arrangement affect yours?

Colliers lists the Zuellig Building as PEZA-accredited, and KMC describes One Ayala as PEZA-accredited. Confirm any building and floor with PEZA.

A cost model for 300 seats

300 seats at 6 sqm per seat is 1,800 sqm (300 x 6), within the 1,500 to 2,100 sqm range from 5 to 7 sqm per seat, a planning assumption and not a sourced standard. Base rent is the sourced PHP 891. Everything else is hypothetical and is not a quote: CUSA PHP 230 per sqm, running costs PHP 400 per sqm, and a seat fee of PHP 15,000 per seat per month. VAT, deposits and restoration at exit are excluded.

• Lease cost per seat per month = (891 + 230 + 400) x 6 = 9,126
• Fit-out per seat = fit-out cost per sqm x 6
• Monthly cost with fit-out spread over 36 months = 9,126 + fit-out per seat / 36

At PHP 30,000 per sqm a lease costs less over three years in this model, and at PHP 40,000 or more it costs more. The break-even term is fit-out per seat / (15,000 − 9,126): 30.6 months at PHP 30,000, 40.9 months at PHP 40,000 and 46.0 months at PHP 45,000. A three-year plan therefore sits close to the crossover, and the result depends on the fit-out price you are quoted. The model leaves out restoration at exit, which adds to a lease, and exit charges, which add to a service agreement.

Night shifts

Cooling terms differ by building. Makati listings show air conditioning billed by metered chiller cost, at a flat rate per sqm, or as an overtime charge on top of dues. Ask what hours the seat fee or the dues cover, how overtime is billed, and whether your floor is on its own meter. Our guide on what Makati quotes leave out has the details.

Term and exit

Ask for the minimum term, the escalation, the break option, the notice period, the exit fee, the deposit and the restoration obligation, in both forms. Our guide to term lengths and exit clauses for Makati serviced offices covers the clauses.

Get a shortlist

Tell FlySpaces your headcount, your term and whether you need PEZA, and the team replies with a shortlist that fits. Inquire here