Income taxes
The Tax Cuts and Jobs Act (the “Act”) enacted on December 22, 2017 reduces the US federal corporate tax rate from 35% to 21% and requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2017, the Company has not completed the accounting for the tax effects of enactment of the Act; however, as described below, it has made a reasonable estimate of the effects on existing deferred tax balances. These amounts are provisional and subject to change.
The provision for income taxes is calculated at US corporate tax rate of approximately 35% (2016: 35%) as follows:
| | | 2017 | | 2016 | |
| | | | | | | | |
| Net loss for the year | | $ | 365,963 | | $ | 820,634 | |
| Tax effect of expenses not deductible for income tax: | | | | | | | |
| Annual effect of book/tax differences | | | (303,870) | | | (485,674) | |
| | | | | | | | |
| Change in valuation allowance | | | (62,093) | | | (334,960) | |
| | | | - | | | - | |
Deferred tax assets
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of December 31:
| | | 2017 | | 2016 | |
| Deferred Tax Assets - Non-current: | | | | | | | |
| | | | | | | | |
| Tax effect of NOL Carryover | | $ | 452,343 | | $ | 390,250 | |
| Cumulative change due to reduced rate | | | (156,117) | | | - | |
| Less valuation allowance | | | (296,226) | | | (390,250) | |
| Deferred tax assets, net of valuation allowance | | | - | | | - | |
At December 31, 2017, the Company performed a comprehensive analysis of its tax estimates and revised comparative figures accordingly, which had no net impact on deferred tax recorded. The Company had net operating loss carryforwards of approximately $1,410,682 (2016: $1,115,000) that may be offset against future taxable income from the year by 2037. No tax benefit has been reported in the December 31, 2017 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. The Company is taxed in the United States at the Federal level. All tax years since inception are open to examination because no tax returns have been filed.