|3 Months Ended|
Sep. 30, 2019
|Income Tax Disclosure [Abstract]|
Note 11 – income taxes
The Company was incorporated in the United States of America, is subject to U.S. tax and plans to file U.S. federal income tax returns. The Company conducts all of its businesses through its subsidiaries and affiliated entities, principally in the PRC. No provision for US federal income tax was made for the three months ended September 30, 2018 as the US entity incurred losses. For the three months ended September 30, 2019, US entity had $72,873 of net loss.
The Company's offshore subsidiary, Shuhai Skill (HK), did not earn any income that was derived in Hong Kong for the three months ended September 30, 2019 and 2018 and therefore did not incur any Hong Kong Profits tax.
Under the Corporate Income Tax Law of the PRC, the corporate income tax rate is 25%. The Company received a tax holiday with a 15% corporate income tax rate since it qualified as a high-tech company.
The Company has generated net operating losses ("NOL") of $396,985 and $371,659 during three months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the Company has approximately $369,870 of NOL related to its PRC subsidiaries and VIEs that expire in years 2019 through 2023. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the Company's future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance as of September 30, 2019 and 2018.
The following table reconciles the U.S. statutory rates to the Company's effective tax rate for the three months ended September 30, 2019 and 2018:
The provisions for income taxes is summarized as follows:
The Company's net deferred tax asset as of September 30, 2019 and June 30, 2019 is as follows:
The valuation allowance increased by $48,617 and $92,915 for the three months ended September 30, 2019 and 2018, respectively.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef