NOTE 10 - INCOME TAXES

 

The Company utilizes ASC 740 “Accounting for Income Taxes”, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

 

For the year ended March 31, 2017, the Company had available for U.S federal income tax purposes net operating loss carryovers of approximately $17,118,774 which expire beginning in 2033. The net operating loss carryovers may be subject to limitations under Internal Revenue Code Section 382, due to significant changes in the Company’s ownership. The Companies Management has provided a full valuation allowance against the full amount of the net operating loss benefit, since, in the opinion of Management, based upon the earnings history of the Company it is more likely than not that the benefits will not be realized.

 

 

The United Arab Emirates is a federation of seven Emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Qaiwain, Ras Al-Khaimah, and Fujairah.

 

Currently, the United Arab Emirates does not have a federal corporate income tax (CIT) regime; however, most of the Emirates introduced income tax decrees in the late 1960s, and taxation is therefore determined on an Emirate-by-Emirate basis.

 

Under the Emirate-based tax decrees, CIT may be imposed on all companies (including branches and permanent establishments [PEs]) at rates of up to 55%. However, in practice, CIT is currently only enforced in respect of corporate entities engaged in the production of oil and gas or extraction of other natural resources in the United Arab Emirates.

 

The income tax provision (benefit) consists of the following:

 

		March 31,
		2017			2016
Federal:
Current		$	-		$	-
Deferred			-			-
			-			-
State and local:
Current			-			-
Deferred			5,991,571			5,991,571
			-			-
Change in valuation allowance			(5,991,571)			(5,991,571)
Income tax provision (benefit)		$	-		$	-

 

Following tax rates were used to calculate deferred taxes for the years ended March 31, 2017 and 2016:

 

For US Entity:
Statutory federal income tax rate		35.00	%
State income taxes rate		0	%
Effective tax rate		35.00	%
US Valuation Reserve		(35	%)
For UK Entity:
Statutory income tax rate		0.0	%
UK Valuation Reserve		0.0	%
Effective Income Tax Rate After Valuation Allowance		0.0	%

 

 

The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.

 

Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Company’s financial statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.

 

All tax years for the Company remain subject to future examinations by the applicable taxing authorities.