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Note 10 - Income Tax
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Text Block]
Note 10 – Income Tax

The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

Deer, the U.S. parent company, was incorporated in the U.S. and has net operating losses (NOL) for income tax purposes. During the year ended December 31, 2011, the U.S. parent company utilized 100% of its NOL against the dividend income received from Winder as earnings repatriation. 

Deer International was incorporated in the BVI and there is no income tax for a company domiciled in the BVI. Accordingly, the Company’s consolidated financial statements do not present any income tax provisions related to the BVI tax jurisdiction where Deer International is domiciled.

Local PRC Income Tax

Pursuant to the tax laws of China, general enterprises are subject to income tax at an effective rate of 25%. Winder enjoys a 15% preferential income tax effective as of 2009 until expiration on December 31, 2011, as a result of its status as a high tech enterprise. Winder has received approval for the renewal of its 15% preferential income tax rate for another three years after 2011.

The following is a reconciliation of tax at the U.S. federal statutory rate to the provision for income tax recorded in the consolidated financial statements for the years ended December 31, 2011, 2010 and 2009:

   
2011
   
2010
   
2009
 
Tax provision at U.S. statutory rate
    34.0 %     34.0 %     34.0 %
US tax on dividend from  
     foreign subsidiary
    3.2 %     - %     - %
Foreign tax rate difference
    (8.0 )%     (9.2 )%     (9.0 )%
Valuation allowance
    0.5 %     1.3 %     1.0 %
Effect of tax holiday
    (10.4 )%     (10.4 )%     (11.0 )%
NOL utilized
    (0.7 )%     - %     - %
Tax per financial statement
    18.6 %     15.7 %     15.0 %

The effect of the change of tax status was recorded in accordance with ASC Topic 740-10, which states that the effect of a change in tax status is computed as of the date of change and is included in the tax provision for continuing operations. Management believes the local tax authorities would not have waived past taxes had it not been for the change in the tax status of the Company’s subsidiary.

If Winder had not been granted high-tech enterprise status, income tax expense for the year ended December 31, 2011, 2010 and 2009, would have been increased by $5,083,249, $3,755,779 and $1,697,000, respectively, and earnings per share would have been reduced by $0.15, $0.11 and $0.07, respectively.

Foreign pretax earnings approximated $50,954,000 and $36,874,000 for 2011 and 2010, respectively. Pretax earnings of a foreign subsidiary are subject to U.S. taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are invested indefinitely outside of the U.S. At December 31, 2011, approximately $72,653,000 of accumulated undistributed earnings of non-U.S. subsidiaries was invested indefinitely. At the existing U.S. federal income tax rate, additional taxes of $13,843,000 would have to be provided if such earnings were remitted currently.