Income Tax

3 Months Ended

Mar. 31, 2013

Income Tax [Abstract]

INCOME TAX

12. INCOME TAX

The Company’s operating subsidiary, Guangzhou Tanke, is a “domestic enterprise” that is registered and operated in Guangzhou, the PRC. Income tax expense for the three months ended March 31, 2013 and 2012 of $32,099 and $116,696 respectively, represents the provision for current income tax expenses in the PRC. The statutory income tax rate in PRC is 25%.

The provision for income tax expense consists of the following components:

	Three Months Ended
	March 31,
	2013			2012
Current provision
PRC	$	32,249		$	117,091
Deferred provision
PRC		(150	)		(395	)
	$	32,099		$	116,696

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 (12.5%) 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). Beginning in 2012, Tanke Bio-Tech starts benefiting from a different reduced tax rate of 15% due to its status of an official new, high-tech company.

As of March 31, 2013 and December 31, 2012, the income tax payable for the Company amounted to $1,849,844 and $1,842,139, respectively. All of the Company’s U.S. net operating loss carry forward was fully reserved.

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

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

	March 31,			December 31,
	2013			2012
	(Unaudited)
Allowance for doubtful accounts in China	$	61,712		$	61,373
Net operating loss carryforward		3,172,379			2,995,201
Share based payment		1,127,078			1,047,130
Valuation allowance		(4,333,977	)		(4,076,661	)
Net deferred tax asset	$	27,192		$	27,042