Income Taxes

6 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 12. INCOME TAXES

On December 22, 2017, the U.S. enacted the “Tax Cuts and Jobs Act” (the “Act”). Under the provisions of the Act, the U.S. corporate tax rate decreased from 35% to 21%. Since the Company has a June 30 fiscal year-end, a blended U.S. statutory federal rate of approximately 28% for the fiscal year ending June 30, 2018 is applied to the provision for income tax and a 21% rate for subsequent fiscal years.

As of December 31, 2018, the Company re-measured deferred tax assets based on the current effective rate of 21% at which these deferred tax amounts are expected to reverse in the future.

The Company’s income tax benefit (expense) for the three and six months ended December 31, 2018 and 2017 are as follows:

	For the three months Ended December 31						For the six months Ended December 31
	2018			2017			2018			2017
Current
U.S.	$	282		$	-		$	(30,315	)	$	(60,162	)
Hong Kong		(881	)		(5,113	)		(881	)		(9,422	)
PRC		(170,380	)		(118,867	)		(267,817	)		(250,925	)
One-time transition tax on accumulated foreign earnings		-			(478,499	)		-			(478,499	)
		(170,979	)		(602,479	)		(299,013	)		(799,008	)
Deferred
U.S.		(74,000	)		1,173,600			120,500			1,073,700
Total income tax benefit (expense)	$	(244,979	)	$	571,121		$	(178,513	)	$	274,692

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

	December 31, 2018			June 30, 2018
Allowance for doubtful accounts	$	891,000		$	540,000
Net operating loss		552,000			355,000
Total deferred tax assets		1,443,000			895,000
Valuation allowance		(688,000	)		(260,500	)
Deferred tax assets, net - long-term	$	755,000		$	634,500

The Company’s operations in the U.S. have incurred a cumulative pre-2017 NOL of approximately $1,421,000 as of June 30, 2018 which may reduce future federal taxable income. The NOL will expire in 2036. During the three and six months ended December 31, 2018, a total of approximately $495,000 and $725,000 of NOL were generated, respectively. Tax benefit derived from such NOL were approximately $104,000 and $152,000 during the three and six months ended December 31, 2018, respectively.

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. Management has provided an allowance against the deferred tax assets balance as of December 31, 2018. The net increase in valuation for the three and six months ended December 31, 2018 amounted to approximately $308,000 and $427,500, respectively, based on management’s reassessment of the amount of the Company’s deferred tax assets that are more likely than not to be realized. Management considers new evidence, both positive and negative, that could affect the Company’s future realization of deferred tax assets. Due to the Company’s forecasted pretax income and continuing utilization of its NOL, management determined that there is sufficient positive evidence to conclude that it is more likely than not that all of the Company’s deferred taxes are realizable.

The Company’s taxes payable consists of the following:

	December 31,		June 30,
	2018		2018
VAT tax payable	$	723,563	$	531,337
Corporate income tax payable		2,227,580		2,104,232
Others		63,961		65,050
Total	$	3,015,104	$	2,700,619