8. Income Taxes

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 8      INCOME TAXES

The Company and its subsidiary, and the consolidated VIE file tax returns separately.

United States

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into legislation. The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 34% to 21%, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax.

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to provide guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. The Company has completed the assessment of the income tax effect of the Tax Act and there were no adjustments recorded to the provisional amounts.

Since the VIE suffered loss during the three months ended March 31, 2019, it has no additional provision amount resulted by the Global Intangible Low Taxed Income inclusion on current earnings and profits of its foreign controlled corporations as. The Company has no transition tax for the same reason.

Hong Kong

The HK tax reform has introduced two-tiered profits tax rates for corporations. Under the two-tiered profits tax rates regime, the profits tax rate for the first $2 million of assessable profits will be lowered to 8.25% (half of the rate specified in Schedule 8 to the Inland Revenue Ordinance (IRO)) for corporations. Assessable profits above $2 million will continue to be subject to the rate of 16.5% for corporations. The Company assessed that the HK entity will not earned profit greater than $2 million, it is subject to a corporate income tax rate of 8.25%.

PRC

WFOE and the consolidated VIE established in the PRC are subject to the PRC statutory income tax rate of 25%, according to the PRC Enterprise Income Tax (“EIT”) law.

The components of the income tax provision are:

	Three months ended March 31,
	2019			2018
	$			$
Current		750			–
Deferred		(929	)		–
Total income tax benefit		(179	)		–

The reconciliation of income taxes expenses computed at the PRC statutory tax rate applicable to income tax expense is as follows:

	Three months ended March 31,
	2019			2018
PRC income tax statutory rate		25.00%			25.00%
Impact of different tax rates in other jurisdictions		(13.35%	)		–
Tax effect of non-deductible entertainment		(2.1%	)		–
Tax effect of non-deductible welfare		(0.02%	)		(0.90%	)
Changes in valuation allowance		(9.42%	)		–
Effective tax rate		0.11%			24.10%