NOTE 9. Income Taxes
China Media is incorporated in the State of Nevada and is subject to the United States Federal and state income tax at a statutory rate of 34%. No provision for the U.S. Federal income taxes has been made as the Company had no taxable income in this jurisdiction for the reporting periods.
Vallant is incorporated in the British Virgin Islands (“BVI”) and under the current laws of the BVI, and is not subject to income taxes.
Xi’An TV is incorporated in the PRC and is subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. Before December 31, 2012, Xi’An TV’s taxable income was assessed at 10% of its taxable revenue. Starting from January 1, 2013, the tax authority determined that Xi’An TV should be taxed at 25% of its taxable income until further notice. No provision for income taxes has been made as Xi’An TV had no taxable income for the years ended June 30, 2017 and 2016.
The following table reconciles the Company’s statutory tax rates to its effective tax rate as a percentage of income before income taxes:
| For The Years Ended June 30, | ||||||
| 2017 | 2016 | |||||
| U.S. statutory rate | 34.0% | 34.0% | ||||
| Foreign income not recognized in the U.S. | -34.0% | -34.0% | ||||
| PRC preferential enterprise income tax rate | 25.0% | 25.0% | ||||
| Valuation allowance | -27.1% | -28.3% | ||||
| Effect of expenses not deductible for tax purposes | 2.1% | 3.3% | ||||
| Effective tax rate | 0% | 0% | ||||
The components of the Company’s deferred income tax assets are set forth below:
| June 30, 2017 | June 30, 2016 | ||
| Deferred tax assets | |||
| Net operating losses | $ 161,751 | $ 126,491 | |
| Total deferred income tax assets | 161,751 | 126,491 | |
| Less: valuation allowance | (161,751) | (126,491) | |
| Net deferred income tax assets | $ - | $ - |
The Company has net taxable operating loss carry forwards of approximately $673,091 for the year ended June 30, 2017. The PRC income tax laws allow the enterprises to offset their future taxable income with taxable operating losses carried forward in a 5-year period. The management is uncertain whether the Company will generate sufficient taxable PRC statutory income in the near future and it is more likely than not that none of the deferred income tax assets will be realized. Therefore, a full valuation allowance has been established for deferred income tax assets as of June 30, 2017.
The tax authority of the PRC conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises have completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities.