14.

Taxation

)

Income tax

The entities within the Company file separate tax returns in the respective tax jurisdictions in which they operate.

i). a. The Company is incorporated in the state of Nevada. Under the current law of Nevada, the Company is

not

subject to state corporate income tax. Following the Share Exchange, the Company became a holding company and does

not

conduct any substantial operations of its own. Before enactment of the Tax Cuts and Jobs Act (“TCJA” or the “Act”) in

December 2017,

the Company did

not

provide for U.S. taxes or foreign withholding taxes on undistributed earnings from its non-U.S. subsidiaries because such earnings are intended to be reinvested indefinitely. On

December 22, 2017,

the U.S. enacted the Act (which is commonly referred to as “U.S. tax reform”). The Act significantly changes U.S. corporate income tax laws including but

not

limited to reducing the U.S. corporate income tax rate from

35%

21%

beginning in

2018,

imposing a

one

-time mandatory tax on previously deferred foreign earnings and imposing a new tax on global intangible low-taxed income (“GILTI”) effective for tax years of non-U.S. corporations beginning after

December 31, 2017.

i). b. Effective from

January 1, 2018,

the Company is subject to the new GILTI tax rules. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations (“CFCs”), subject to the possible use of foreign tax credits and a deduction equal to

percent to offset the income tax liability, subject to some limitations. Under U.S. GAAP, the Company has made an accounting policy choice of treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”), instead of factoring such amounts into the Company's measurement of its deferred taxes (the “deferred method”). For the years ended

December 31, 2020

and

2019,

provision for federal corporate income tax has been made in the financial statements as the Company has

aggregated positive tested income.

ii). Under the current law of the BVI, the Company's subsidiaries being incorporate in the BVI are

not

subject to tax on income or capital gains. Additionally, upon payments of dividends by these BVI companies to its respective shareholders,

BVI withholding tax will be imposed.

iii). The Company's subsidiaries being incorporated in Hong Kong are governed by the

Hong Kong Inland Revenue Ordinance (the “HK tax laws”)

. E

ffective from

April 1, 2018,

two

-tier corporate income tax system was officially implemented in Hong Kong. The applicable income tax rate is

8.25%

for the

first

HK$2.0

million profits, and the subsequent profits are taxed at

16.5%.

Additionally, upon payments of dividends by these Hong Kong subsidiaries to its shareholders,

Hong Kong withholding tax will be imposed.

iv). The Company's operating subsidiaries and VIEs, being incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). The EIT rate of PRC is

25%,

which applies to both domestic and foreign invested enterprises.

As approved by the related PRC governmental authorities, Business Opportunity Online continuously qualified as a High and New Technology Enterprise until

November 2021,

which enabled the entity, as approved by the local tax authorities of Beijing, the PRC, to continue enjoying the preferential EIT rate of

15%

until

November 2021.

Therefore, for the years ended

December 31, 2020

and

2019,

the applicable EIT rate of Business Opportunity Online was

15%.

In accordance with the

2018

Bulletin

No.

issued by the PRC State Administration of Taxation, which come into effect from

January 1, 2018,

an enterprise that obtains qualification as or remains as a High and New Technology Enterprise or Small and Medium-sized Tech Enterprise in any time of

2018

and afterwards, is allowed to carry forward all its previous

five

years' net operating losses NOLs (starting from NOL of

2013

) to up to

ten

years, compared with the PRC standard NOLs carryforward period of

years.

The applicable EIT rate for other PRC operating entities of the Company is

25%

for the years ended

December 31, 2020

and

2019.

The current EIT law also imposed a

10%

withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside mainland China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company.

)

Turnover taxes and the relevant surcharges

Service revenues generated by the Company's PRC operating subsidiaries and VIEs are subject to Value Added Tax (“VAT”). VAT rate for provision of modern services (other than lease of corporeal movables) is

6%,

and for small scale taxpayer,

3%.

Therefore, for the years ended

December 31, 2020

and

2019,

the Company's service revenues generated in the PRC are subject to VAT at a rate of

6%,

after deducting the VAT paid for the services purchased from suppliers, or at a rate of

without any deduction of VAT paid for the services purchased from suppliers. The surcharges of the VAT in the aggregate is

12%

14%

of the VAT, depending on which tax jurisdiction the Company's PRC operating subsidiaries and VIE operate in.

As of

December 31, 2020,

and

2019,

taxes payable consists of:

	As of December 31,
	2020		2019
	US$('000)		US$('000)

Turnover tax and surcharge payable		1,353		1,244
Enterprise income tax payable		2,077		1,970
Taxes payable		3,430		3,214

A reconciliation of the income tax benefit determined at the U.S. federal corporate income tax rate to the Company's effective income tax expense is as follows:

	Year Ended December 31,
	2020			2019
	US$('000)			US$('000)

Pre-tax loss		(5,078	)		(1,221	)
U.S. federal rate		21	%		21	%
Income tax benefit computed at U.S. federal rate		1,066			256
Reconciling items:
Rate differential for foreign earnings		74			137
Preferential tax treatment effect		(205	)		(109	)
Tax effect on non-taxable change in fair value of warrant liabilities		137			105
Provision of valuation allowance on deferred tax assets		(917	)		(177	)
Expired tax attribute carryforwards		(372	)		(253	)
Tax effect on other non-deductible expenses/non-taxable income		74			(8	)
Effective income tax expense		(143	)		(49	)

For the years ended

December 31, 2020

and

2019,

the Company's income tax expense consisted of:

	Year Ended December 31,
	2020			2019
	US$('000)			US$('000)

Current		-			(217	)
Deferred		(143	)		168
Income tax expense		(143	)		(49	)

The Company's deferred tax assets at

December 31, 2020

and

2019

were as follows:

	As of December 31,
	2020			2019
	US$('000)			US$('000)

Tax effect of net operating losses carried forward		10,123			9,160
Bad debts provision		728			743
Valuation allowance		(10,245	)		(9,190	)
Total net deferred tax assets		606			713

The U.S. holding company has incurred aggregate net operating losses (NOLs) of approximately

US$23.3

million and

US$20.3

million at

December 31, 2020

and

2019,

respectively. The NOLs carryforwards as of

December 31, 2017

gradually expire over time, the last of which expires in

2037.

NOLs incurred after

December 31, 2017

will

longer be available to carry back but can be carried forward indefinitely. Furthermore, the Act imposes an annual limit of

80%

on the amount of taxable income that can be offset by NOLs arising in tax years ending after

December 31, 2017.

The Company maintains a full valuation allowance against its net U.S. deferred tax assets, since due to uncertainties surrounding future utilization, the Company estimates there will

not

be sufficient future earnings to utilize its U.S. deferred tax assets.

The NOLs carried forward incurred by the Company's PRC subsidiaries and VIEs were approximately

US$22.5

million and

US$23.6

million at

December 31, 2020

and

2019,

respectively. The losses carryforwards gradually expire over time, the last of which expires in

2030.

The related deferred tax assets were calculated based on the respective net operating losses incurred by each of the PRC subsidiaries and VIEs and the respective corresponding enacted tax rate that will be in effect in the period in which the losses are expected to be utilized.

The Company recorded approximately

US$10.2

million and

US$9.2

million valuation allowance as of

December 31, 2020

and

2019,

respectively, because it is considered more likely than

not

that a portion of the deferred tax assets will

not

be realized through sufficient future earnings of the entities to which the operating losses related.

For the years ended

December 31, 2020

and

2019,

total deferred tax assets valuation allowance provided was approximately

US$0.92

million and

US$0.18

million, respectively.