Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

INCOME TAXES

Note 8    – INCOME TAXES

The Company’s operations in the People’s Republic of China are subject to the Income Tax Law of the People’s Republic of China. Pursuant to the PRC Income Tax Laws, the Company is subject to the Enterprise Income Tax (“EIT”) which is generally a statutory rate of 25% beginning January 2008, on income as reported in its statutory financial statements after appropriate tax adjustments.  The Company’s subsidiary, Joway Decoration, as a wholesale and retail enterprise, was subject to taxable income at a verified rate of 5% of revenue in 2012 pursuant to “Measures for Verification Collection of Enterprise Income Tax” issued by the PRC State Administration of Taxation and changed to subject to EIT from 2013.

The table below summarizes the differences between the PRC statutory federal rate and the Company’s effective tax rate:

	For the year ended December 31,
	2013			2012
Tax computed at China statutory rates		25	%		25	%
Effect of reduced rate on Joway Decoration (1)		0			(6	%)
Tax adjustment from China tax authority for 2012 income tax  (2)		(4	%)		0
Effect of losses		(26	%)		(20	%)
Effective rate		(5	%)		(1	%)

(1) Prior to 2013, pursuant to Measures for Verification Collection of Enterprise Income Tax issued by the PRC State Administration of Taxation, Joway Decoration, as a wholesale and retail enterprise, is subject to taxable income at a verified rate of 5% of revenue.

(2) The Company’s 2012 Corporate Income Tax Filing in China was reviewed by the PRC tax authority and reduced the Company’s income tax deduction for the 2012 taxable year. As a result, the Company paid additional income tax of $62,896.

The components of deferred income tax asset are as follow:

	As of December 31,
	2013			2012
Deferred income tax asset:
Net operating loss carry forwards	$	796,000		$	290,000
Valuation allowance		(796,000	)		(290,000	)
Total	$	-		$	-

As of December 31, 2013, the Company has a net operating loss carryforward for tax purposes of approximately $3.2 million available to offset future taxable income through 2018.

The Company’s income tax returns since inception are subject to audit by regulatory authorities. Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations, cash flows or financial position. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. FASB ASC Topic 740, Income Taxes provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

We recognize tax liabilities in accordance with ASC Topic 740 and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined..