INCOME TAXES

9 Months Ended

Sep. 30, 2014

INCOME TAXES [Text Block]

17.	INCOME TAXES
	All of the Company’s operations are in the PRC, France, and Portugal, and in accordance with the relevant tax laws and regulations. The corporate income tax rate for each country is as follows:

• PRC tax rate is 25%.

• France tax rate is 33.3%

• Portugal tax rate is 23%.

The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the periods ended September 30, 2014 and 2013:

		9/30/2014			9/30/2013
Income attributed to PRC & Europe	$	7,718,719		$	13,132,057
Loss attributed to US		(627,323	)		(165,266	)
Income before tax		7,091,396			12,966,791
PRC Statutory Tax at 25% Rate		2,378,889			3,289,034
Effect of tax exemption granted		-			-
Income tax	$	2,378,889		$	3,289,034

Per Share Effect of Tax Exemption
		9/30/2014		9/30/2013
Effect of tax exemption granted	$	-	$	-
Weighted-Average Shares Outstanding
Basic		34,873,699		34,616,714
Per share effect	$	-	$	-

The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for the periods ended September 30, 2014 and 2013:

	9/30/2014	9/30/2013
U.S. federal statutory income tax rate	35%	35%
Lower rates in PRC, net	-10%	-10%
Tax holiday for foreign investments	8.55%	0.37%
The Company’s effective tax rate	33.55%	25.37%

Effective January 1, 2008, the PRC government implemented a new 25% tax rate across the board for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday which is defined as “two-year exemption followed by three-year half exemption” hitherto enjoyed by tax payers. As a result of the new tax law of a standard 25% tax rate, tax holidays were terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises that were already participating in tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized.

The Company has accrued a deferred tax asset as a result of its net operating loss as of and before September 30, 2014 because the Company planned to set up operations in the United States. The company anticipates that the operations within the United States will generate income in the future so that it will be able to take full advantage of the accrued tax asset. Accordingly the Company has not provided a valuation allowance for the accrued tax asset.

The Company has detailed tax rates for its subsidiaries for 2014 and 2013 in the following table.

	China Income Tax
	Rate
Subsidiary	2014	2013
International Lorain	0%	0%
Junan Hongran	25%	25%
Luotian Lorain	25%	25%
Beijing Lorain	25%	25%
Shandong Lorain	25%	25%
Shandong Greenpia	25%	25%
Dongguan Lorain	25%	25%