5.
INCOME TAXES
The Company operates in various countries: United States, British Virgin Island, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate, as follows:
United States of America
The Company is registered in the State of Nevada and is subject to United States current tax law.
British Virgin Island
Under the current BVI law, the Company is not subject to tax on income.
Hong Kong
For the years ended December 31, 2016 and 2015, no provision for Hong Kong Profits Tax is provided for, since the Company’s income neither arises in, nor is derived from Hong Kong under its applicable tax law. The reconciliation of income tax rate to the effective income tax rate based on loss before income taxes from foreign operation for the years ended December 31, 2016 and 2015 are as follows:
|
|
| Years ended December 31, | ||||
|
|
| 2016 |
| 2015 | ||
|
|
|
|
|
| ||
| Loss before income taxes |
| $ | (122,848) |
| $ | (141,938) |
| Statutory income tax rate |
|
| 16.5% |
|
| 16.5% |
| Income tax impact at Hong Kong Profits Tax |
|
| (20,269) |
|
| (23,419) |
| Non-deductible items |
|
| 20,269 |
|
| 23,419 |
|
|
|
|
|
|
|
|
| Income tax expense |
| $ | - |
| $ | - |
As of December 31, 2016, Hong Kong operation generated approximately $1,420,970 of net operating loss carryforwards for Hong Kong tax purpose at no expiration.
The PRC
For the years ended December 31, 2016 and 2015, the Company generated no operating result and accordingly, no provision for income tax has been recorded.
As of December 31, 2016, the PRC operation incurred $1,851,211 of net operating losses carryforward available for income tax purposes that may be used to offset future taxable income and will begin to expire in 5 years from the year of incurrence, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.
The following table sets forth the significant components of the aggregate net deferred tax assets of the Company as of December 31, 2016 and 2015:
|
|
| As of December 31, | ||||
|
|
| 2016 |
| 2015 | ||
| Deferred tax assets: |
|
|
| |||
| Net operating loss carryforward from: |
|
|
| |||
| – United States of America |
| $ | 2,172,373 | $ | 2,172,373 | |
| – Hong Kong |
|
| 234,459 |
| 214,190 | |
| – The PRC |
|
| 462,803 |
| 462,803 | |
| Total deferred tax assets |
|
| 2,869,635 |
| 2,849,366 | |
| Less: valuation allowance |
|
| (2,869,635) |
| (2,849,366) | |
|
Net deferred tax assets |
| $ | - |
| $ | - |
As of December 31, 2016, the Company incurred $9,376,381 the aggregate net operating loss carryforwards available to offset its taxable income for income tax purposes. The Company has provided for a full valuation allowance against the deferred tax assets of $2,869,635 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future. For the year ended December 31, 2016, the valuation allowance increased by $20,269, primarily relating to net operating loss carryforwards.