SHINECO, INC.

NOTE 11 - TAXES

(a) Corporate Income Taxes

The Company is subject to income taxes on an entity basis on income arising in or derived from the location in which each entity is domiciled.

Shineco is incorporated in the United States and has no operating activities. Tenet-Jove and its VIEs entities are governed by the Income Tax Laws of the PRC, and are currently subject to tax at a statutory rate of 25% on taxable income. Two VIE entities receive a full income tax exemption from the local tax authority of the PRC as agricultural enterprises as long as the favorable tax policy remains unchanged.

i)	*The components of the income tax expense are as follows:*

	For the years ended
	June 30,
	2017		2016
Current income tax provision	$	1,165,857	$	1,298,472
Deferred income tax provision (benefit)		86,780		(120,765)
Total	$	1,252,637	$	1,177,707

ii)

The following table summarizes deferred tax assets resulting from differences between the financial reporting basis and tax basis of assets and liabilities:

	June 30, 2017		June 30, 2016

Allowance for doubtful accounts	$	24,598	$	123,818
Inventory reserve		209,236		203,674
Net operating loss carry-forwards		111,882		114,122
Total		345,716		441,614
Valuation allowance		(111,882)		(114,122)
Deferred tax assets, net	$	233,834	$	327,492

Movement of the valuation allowance:

	June 30, 2017		June 30, 2016

Beginning balance	$	114,122	$	108,932
Current year addition		-		13,971
Exchange difference		(2,240)		(8,781)
Ending balance	$	111,882	$	114,122

iii)

The following table reconciles the PRC statutory rates to the Company's effective tax rate for the years ended June 30, 2017 and 2016:

	For the years ended
	June 30,
	2017			2016
PRC statutory tax rate	$	25.00	%	$	25.00	%
Exemption rendered by local tax authorities		(12.31)	%		(12.56)	%
Effective tax rate	$	12.69	%	$	12.44	%

(b) Value Added Tax

The Company is subject to a value added tax (“VAT”) for selling merchandise. The applicable VAT rate is 17% for products sold in the PRC. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under commercial practice in the PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued.

In the event that the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty based on the amount of the taxes which are determined to be late or deficient, and will be expensed in the period if and when a determination is made by the tax authorities. There were no assessed penalties as of June 30, 2017 and 2016, respectively.

(c) Taxes Payable

Taxes payable consists of the following:

	June 30, 2017		June 30, 2016

Income tax payable	$	1,541,548	$	1,201,641
Value added tax payable		60,685		69,955
Business tax and other taxes payable		6,693		6,546
	$	1,608,926	$	1,278,142