Note 15. INCOME TAXES

Income tax expense for the years ended June 30, 2016 and 2015 varied from the amount computed by applying the statutory income tax rate to income before taxes. Reconciliations between the expected federal income tax rate using the federal statutory tax rate of 34% to the Company’s effective tax rate are as follows:

	For the years ended June 30,
	2016		2015
		%		%

U.S. statutory tax rate		34.0		34.0
U.S. permanent difference		(11.0)		(4.9)
Change in valuation allowance		(105.9)		(109.4)
Rate differential in foreign jurisdiction		25.0		25.0
Other		3.3		15.4
Total tax expense		(54.6)		(39.9)

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

The income tax (expense) benefit for the years ended June 30, 2016 and 2015 are as follows:

	For the years ended June 30,
	2016		2015

Current
USA	$	-	$	-
Hong Kong		23,287		(23,963)
China		(555,280)		(519,958)
		(531,993)		(543,921)

Deferred
USA		(280,600)		116,700
Other countries		-		-
		(280,600)		116,700

Total	$	(812,593)	$	(427,221)

The Company’s deferred tax assets are comprised of the following:

	For the years ended June 30,
	2016		2015

Allowance for doubtful accounts	$	65,000	$	248,000
Stock-based compensation		735,000		382,000
Net operating loss		3,752,000		2,176,000
Total deferred tax assets		4,552,000		2,806,000
Valuation allowance		(4,552,000)		(2,525,400)
Deferred tax assets, net - long-term	$	-	$	280,600

Our operations in the U.S. have incurred a cumulative net operating loss of approximately $8,629,000 and $5,590,560, respectively, as of June 30, 2016 and 2015, which may reduce future taxable income. This carry-forward will expire if not utilized by 2036. As of June 30, 2016 and 2015, major components of our deferred tax assets included net operating loss of our U.S entities, stock-based compensation and allowance for doubtful accounts.

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of the deferred tax assets, including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes, and other relevant factors. Due to the termination of the proposed vessel acquisition in December 2015, management concluded that the chances for the Company’s U.S. entities to be profitable in the foreseeable future became remote, and accordingly 100% of the deferred tax assets balance has been provided a valuation allowance as of June 30, 2016 based on management’s estimate. The net increase in the valuation allowance for the year ended June 30, 2016 and 2015 was $2,026,600 and $1,050,300, respectively.

The Company’s taxes payable consists of the following:

	June 30,		June 30,
	2016		2015

VAT tax payable	$	475,066	$	296,935
Corporate income tax payable		1,100,380		664,132
Others		61,751		35,581
Total	$	1,637,197	$	996,648