INCOME TAX

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

11. INCOME TAX

All of the Company’s operations are in the PRC, and in accordance with the relevant tax laws and regulations. The corporate income tax rate in China is 25%.

In order to encourage enterprises to operate senior homes, PRC tax law provides a tax holiday by waiving the income tax for entities operating in this industry. According to the Minfa (2015) No. 33 “Advice to Encourage Private Capital to Participate in the Development of Pension Services”, jointly issued by ten ministries which include the Ministry of Civil Affairs and the Ministry of Finance of the People’s Republic of China, the Company is entitled to benefit from the sales tax exemption and business tax exemption policy. As such, the Company was not subject to income tax as of December 31, 2016. As of the date of this report, the Company does not expect that this tax exemption policy will terminate in the near future.

The Company is subject to US Federal tax laws. The Company has not recognized an income tax benefit for its operating losses in the United States because the Company does not expect to commence active operations in the United States. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. Deferred tax asset is calculated based on the statutory average rate of 34%.

FIHK and Spone are incorporated in Hong Kong and are subject to Hong Kong profits tax at a tax rate of 16.5%. No provision for Hong Kong profits tax has been made as FIHK and Spone had no taxable income during the reporting period. The Company has not recognized an income tax benefit for its operating losses in Hong Kong because the Company does not expect to commence active operations in Hong Kong. The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not. Deferred tax asset is calculated based on the statutory average rate of 16.5%.

The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the three-month period ended March 31, 2018 and 2017:

	3/31/2018			3/31/2017
Income attributed to PRC operations	$	51,582		$	37,366
Loss attributed to US and HK entities		(13,000	)		(1,246	)
Income/(loss) before tax	$	38,582		$	36,120
PRC Statutory Tax at 25% Rate		12,895			9,030
Effect of tax exemption granted		(12,895	)		(9,030	)
Income tax		-			-

Per Share Effect of Tax Exemption

	3/31/2018		3/31/2017
Effect of tax exemption granted	$	12,895	$	9,030
Weighted-Average Shares Outstanding Basic		56,560,007		56,560,007
Per share effect	$	0.00		0.00

The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for the periods ended March 31, 2018 and 2017:

	3/31/2018			3/31/2017
U.S. federal statutory income tax rate		34	%		34	%
Lower rates in PRC, net		(9	%)		(9	%)
Tax holiday for senior care industry		(25	%)		(25	%)
The Company’s effective tax rate		0	%		0	%

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has considered the accounting impact of the effects of the Act during the year ended December 31, 2017 including a reduction in the corporate tax rate from 34% to 21% among other changes.