14. INCOME TAXES

The United States of America

The Company is incorporated in the State of Nevada in the U.S., and is subject to U.S. federal corporate income taxes with tax rate of 21%. The State of Nevada does not impose any state corporate income tax.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The Tax Act also stablished the Global Intangible Low-Taxed Income (GILTI), a new inclusion rule affecting non-routine income earned by foreign subsidiaries. For the six months ended September 30, 2020 and 2019, the Company’s foreign subsidiaries in China were operating at loss on a consolidated basis which resulted in no GILTI tax.

The Company's net operating loss from U.S for the six months ended September 30, 2020 amounted to approximately $0.8 million. As of September 30, 2020, the Company’s net operating loss carryforward for U.S. income taxes was approximately $3.3 million. The net operating loss carryforward will not expire and is available to reduce future years’ taxable income, but limited to 80% of income until utilized. Management believes that the utilization of the benefit from this loss appears uncertain due to the Company’s operating history. Accordingly, the Company has recorded a 100% valuation allowance on the deferred tax asset to reduce the deferred tax assets to zero on the unaudited condensed consolidated balance sheets. As of September 30 and March 31, 2020, valuation allowances for deferred tax assets were approximately $0.69 million and $0.53 million, respectively. Management reviews the valuation allowance periodically and makes changes accordingly.

PRC

Senmiao Consulting, Sichuan Senmiao, Hunan Ruixi, Ruixi Leasing, Jinkailong, and Yicheng are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. The EIT rate for companies operating in the PRC is 25%.

Income taxes in the PRC are consist of:


	For the Three Months ended September 30,				For the Six Months ended September 30,
	2020		2019		2020		2019
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Current income tax expenses	$	705	$	4,457	$	6,977	$	105,598
Deferred income tax expenses	$	—	$	—	$	—	$	—
Total income tax expenses	$	705	$	4,457	$	6,977	$	105,598

As of September 30, 2020 and March 31, 2020, the Company’s PRC entities from continuing operations had net operating loss carryforwards of approximately $4.6 million and $1.7 million, respectively, which will expire starting from 2023 and ending in 2024. In addition, allowance for doubtful accounts must be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return. The bad debt allowances are incurred in Company’s PRC subsidiaries and VIEs which were operating at losses, the Company believes it is more likely than not that its PRC operations will be unable to fully utilize its deferred tax assets related to the net operating loss carryforwards in the PRC. As a result, the Company provided 100% allowance on all deferred tax assets on net operating loss carryforwards in the PRC of $1,140,800 and $414,996 related to its operations in the PRC at September 30, 2020 and March 31, 2020, respectively and provided 100% allowance on all deferred tax assets on allowance for doubtful account of $192,355 and $178,381 related to its operations in the PRC at September 30, 2020 and March 31, 2020, respectively.

The tax effects of temporary differences from continuing operations that give rise to the Company's deferred tax assets are as follows:


	September 30,		March 31,
	2020		2020
	(Unaudited)
Net operating loss carryforwards in the PRC	$	1,140,800	$	414,996
Net operating loss carryforwards in the U.S.		691,882		527,365
Allowance for doubtful account		192,355		178,381
Less: valuation allowance		(2,025,037)		(1,120,742)
	$	—	$	—

As of September 30, 2020 and March 31, 2020, the Company's PRC entities associated with the discontinued P2P lending operations had net operating loss carryforwards of approximately $9.8 million and $8.8 million, respectively, which will expire in 2023 to 2024. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. At September 30, 2020 and March 31, 2020, full valuation allowance is provided against the deferred tax assets based upon management’s assessment as to their realization.

The tax effects of temporary differences from discontinued operations that give rise to the Company’s deferred tax assets are as follows:


	September 30, 2020		March 31, 2020
	(Unaudited)
Net operating loss carryforwards in the PRC	$	2,457,279	$	2,206,673
Less: valuation allowance		(2,457,279)		(2,206,673)
	$	—	$	—