The agency filed its taxes incorrectly by claiming all its income was tax-exempt even though it earns from commercial activities, and it didn't record the withholding taxes that were already deducted. This could lead to the tax bureau charging extra taxes and penalties.

Why It Matters

Recommended Actions

• Review and update the certificate of registration of NHA, declaring all the sources of income to ascertain correct tax obligations
• Use the correct income tax return and appropriately report all sources of income as taxable or tax-exempt, Obtain certificate of tax exemption from the BIR if NHA wants to be fully exempted from tax and to address any uncertainties regarding the treatment of withheld taxes
• Recompute and adjust the relevant accounts for Fines and penalties - Business income (Delinquency interest), Receivables, and Withholding Tax at Source to reflect the corrected balance
• And Ensure recognition and recording of all creditable withholding taxes and apply them as tax credits against the computed income tax liability/tax due of the NHA for the taxable year.

Original Audit Finding Excerpt

"The income tax retum used by NHA for annual filing declared all its revenue as exempt from tax despite having sources of income from commercial activities and the non-recognition of creditable withholding taxes, contrary to the relevant provisions of RA No. 8424, as amended by RA No. 10963, RA No. 11534, RA No. 7279, and Revenue Regulations No. 11-97, may enables the Bureau of Internal Revenue (BIR) to assess ‘NHA for potential tax obligations, penalties, and surcharges."

Source Document