The Company and its subsidiaries file separate income tax returns.
The United States of America
The Company is incorporated in the State of Nevada in the U.S., and is subject to U.S. federal corporate income tax at progressive rates ranging from 15% to 35%. The state of Nevada does not impose any state corporate income tax.
British Virgin Islands
RGL is incorporated in the British Virgin Islands ("BVI"). Under the current laws of the BVI, RGL is not subject to tax on income or capital gains. In addition, upon payments of dividends by RGL, no BVI withholding tax is imposed. During the years ended March 31, 2017, 2016 and 2015, there was no income or expenses in the BVI.
UK
DDL, TCL and DDHL are all incorporated in the United Kingdom (UK) and the applicable UK statutory income tax rate for these companies is 20%.
For the years ended March 31, 2017, 2016 and 2015 loss before income tax expense (benefit) arose in the UK and U.S.
| Year ended March 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| $ | $ | $ | ||||||||||
| Loss before income taxes arising in UK | (1,251,870 | ) | (1,300,468 | ) | (979,014 | ) | ||||||
| Loss before income taxes arising in United States | (299,396 | ) | (239,169 | ) | (340,826 | ) | ||||||
| Total loss before income tax | (1,551,266 | ) | (1,539,637 | ) | (1,319,840 | ) | ||||||
Reconciliation of our effective tax rate to income (loss) to the statutory U.S federal tax rate is as follows:
| Year ended March 31, | ||||||||||||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||
| Loss before income taxes | (1,551,266 | ) | (1,539,637 | ) | (1,319,840 | ) | ||||||||||||||||||
| Expected tax benefit | (527,000 | ) | (34 | %) | (523,000 | ) | (34 | %) | (449,000 | ) | (34 | %) | ||||||||||||
| Foreign tax differential | 217,000 | 14 | % | 216,000 | 14 | % | 133,000 | 10 | % | |||||||||||||||
| Enhanced research and development | (198,000 | ) | (13 | %) | (177,000 | ) | (11 | %) | (148,000 | ) | (11 | %) | ||||||||||||
| Change in valuation allowance | 455,000 | 29 | % | 484,000 | 31 | % | 458,000 | 35 | % | |||||||||||||||
| Actual income tax benefit | - | - | - | - | - | - | ||||||||||||||||||
The tax effects of the temporary differences that give rise to significant portions of deferred income tax assets are presented below:
| As of March 31, | ||||||||
| 2017 | 2016 | |||||||
| $ | $ | |||||||
| Net operating tax loss carried forwards | 1,818,000 | 1,363,000 | ||||||
| Valuation allowance | (1,818,000 | ) | (1,363,000 | ) | ||||
| Net deferred tax assets | - | - | ||||||
For each of the years ended March 31, 2017, 2016 and 2015, the Company did not have unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. Management does not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.
The Company mainly files income tax returns in the United States and the UK. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2014. The UK tax returns for the Company's UK subsidiaries are open to examination by the UK tax authorities for the tax years beginning in April 1, 2011.
As of March 31, 2017, the Company has net operating losses (NOLs) of approximately $0.9 million in the US and $5.8 million in the UK. These UK NOLs may be carried forward indefinitely. The US NOLs will expire through 2036.