NOTE 7– INCOME TAXES
The Company operates in more than one jurisdiction with the main operations conducted in PRC and no activities in The United States. These are complex regulatory environments subject to different interpretations by the taxpayer and the respective governmental taxing authorities. The Company evaluates its tax positions and establishes liabilities, if required.
Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”), as from January 1, 2008 onwards, the EIT is at a statutory rate of 25%.
Net deferred tax assets consist of the following components as of December 31:
| 12/31/2017 | 12/31/2016 | |||||||
| Unused tax loss brought forward | $ | (209,438 | ) | $ | (7,957 | ) | ||
| Loss for the year | (192,937 | ) | (201,481 | ) | ||||
| Expenses not deductible for tax | — | — | ||||||
| Total net operating loss carry forwards | $ | (402,375 | ) | $ | (209,438 | ) | ||
| Effective tax rate | 21 | % | 25 | % | ||||
| Unrecognized deferred tax asset carried forward | $ | 84,500 | $ | 52,360 | ||||
| Less: valuation allowances | (84,500 | ) | (52,360 | ) | ||||
| Deferred income tax benefit, net of valuation allowance | $ | — | $ | — | ||||
The Company has not recognized a deferred tax asset in respect of PRC tax loss in these financial statements as it is not more-likely-than-not that the future taxable profit against which loss can be utilized will be available to the entities operating in PRC. Accordingly, a 100% valuation allowance has been made.
Uncertain Tax Positions
Interest associated with unrecognized tax benefits are classified as income tax and penalties in selling, general and administrative expenses in the statements of operations. For the years ended December 31, 2017 and 2016, the Company had no related interest and penalties expenses. Currently, the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax position in all past years.
Statutory Reserve
In accordance with the laws and regulations of the PRC, a wholly-owned Foreign Invested Enterprise’s income, after the payment of the PRC income taxes, shall be allocated to the statutory reserves. The allocation is 10 percent of the net income and the cumulative allocations are not to exceed 50 percent of the registered capital. However, the laws do not prohibit enterprises allocate net income to this reserve after the limit of 50 per cent of registered capital has been reached. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of December 31, 2017 and 2016, the Company has not allocated to these non-distributable reserve funds due to loss sustained in the years ended December 31, 2017 and 2017.