Income Tax

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Income Tax

10.  INCOME TAX

The Company’s operating subsidiary, Guangzhou Tanke, is a “domestic enterprise” that is registered and operated in Guangzhou, the PRC.

The PRC's legislative body, the National People's Congress, adopted the unified Enterprise Income Tax ("EIT") Law on March 16, 2007. This new tax law replaces the existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rate is set at 25% for both domestic enterprises and foreign-invested enterprises. However, there is a transition period for enterprises, whether foreign-invested or domestic, that are currently receiving preferential tax treatments granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and will transit into the new rate over a five year period beginning on the effective date of the EIT Law. Enterprises that are currently entitled to exemptions for a fixed term may continue to enjoy such treatment until the exemption term expires. Income tax expense for the three and nine months ended September 30, 2011 and 2010 represents the provision for current income tax expenses in the PRC.

Tanke Bio-Tech, a subsidiary of Guangzhou Tanke, is a joint venture with a foreign entity that received a full exemption from income taxes in 2007 and 2008 and half rate reduction for years 2009, 2010 and 2011 in accordance with the Law of the People's Republic of China on Income Tax of Enterprises with Foreign Investment and Foreign Enterprises and Notification of the State Council on Carrying out the Transitional Preferential Policies concerning Enterprise Income Tax (Guofa (2007) No. 39).

As of September 30, 2011 and December 31, 2010, the income tax payable for the Company amounted to $1,164,379 and $699,637, respectively.

Significant components of the Company’s deferred tax asset are as follows.

	September 30,		December 31,
	2011		2011
Allowance for doubtful accounts		23,949		17,887
Deferred tax asset	$	23,949	$	17,887