14. INCOME TAXES

Income tax expense for the years ended June 30, 2015 and 2014 varied from the amount computed by applying the statutory income tax rate to income before taxes. A reconciliation between the expected federal income tax rate using the federal statutory tax rate of 35% to the Company’s effective tax rate is as follows:

	For the years ended June 30,
	2015		2014
	%		%

U.S. expected federal income tax benefit		35.0		35.0
U.S. state, local tax net of federal benefit		10.9		10.9
U.S. permanent difference		(0.2)		(0.3)
U.S. temporary difference		(45.7)		(45.5)
Permanent differences related to other countries		(28.3)		0.9
Hong Kong statutory income tax rate		(16.5)		(16.5)
Hong Kong income tax benefit		4.9		-
Total tax expense		(39.9)		(15.5)

The U.S. temporary difference was mainly comprised of unearned compensation amortization and provision for allowance for doubtful accounts.

The income tax expense for the years ended June 30, 2015 and 2014 are as follows:

	For the years ended June 30,
	2015		2014

Current
USA	$	-	$	-
Hong Kong		(23,963)		(130,268)
China		(519,958)		-
		(543,921)		(130,268)

Deferred
USA		116,700		50,330
Other countries		-		115
		116,700		50,445

Total	$	(427,221)	$	(79,823)

Deferred tax assets are comprised of the following:

	For the years ended June 30,
	2015		2014

Allowance for doubtful accounts	$	248,000	$	224,000
Stock-based compensation		382,000		411,000
Net operating loss		2,176,000		1,004,000
Total deferred tax assets		2,806,000		1,639,000
Valuation allowance		(2,525,400)		(1,475,100)
Deferred tax assets, net - long-term	$	280,600	$	163,900

Operations in the USA have incurred a cumulative net operating loss of approximately $5,590,560 as of June 30, 2015, which may be available to reduce future taxable income. This carry-forward will expire if not utilized by 2035. Deferred tax assets relating to the allowance for doubtful accounts, stock compensation expenses and net operating loss amounting to $248,000, $382,000 and $2,176,000 have been recorded respectively. 90% of the deferred tax assets balance has been provided as a valuation allowance as of June 30, 2015 based on management’s estimate.

Taxes payable consist of the following:

	June 30,		June 30,
	2015		2014

VAT tax payable	$	296,935	$	67,315
Corporate income tax payable		664,132		130,770
Others		35,581		9,372
Total	$	996,648	$	207,457