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Income Tax
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Tax

11. INCOME TAX

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

British Virgin Islands (“BVI”)

Under the current laws of the BVI, the Company’s entity incorporated in the BVI is not subject to tax on income or capital gains. In addition, upon payments of dividends by the entity to their shareholders, no BVI withholding tax will be imposed.

UAE

Under the current laws of the UAE, the Company is not subject to tax on income or capital gain. Additionally, UAE does not impose a withholding tax on payments of dividends to shareholders.

Hong Kong

Under the current Hong Kong Inland Revenue Ordinance, the Company’s Hong Kong subsidiaries are subject to Hong Kong profits tax at the rate of 16.5% on their taxable income generated from the operations in Hong Kong. Payments of dividends by the Hong Kong subsidiaries to the Company are not subject to withholding tax in Hong Kong. A two-tiered profits tax rates regime was introduced in 2018 where the first HK$2 million of assessable profits earned by a company will be taxed at half of the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates.

PRC

The Company’s PRC subsidiaries are subject to the PRC Corporate Income Tax Law (“CIT Law”) and are taxed at the statutory income tax rate of 25%, unless otherwise specified.

The CIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the CIT Law define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, property, etc., of a non‑PRC company is located.” Based on a review of surrounding facts and circumstances, the Group does not believe that it is more likely than not that its operations outside the PRC should be considered a resident enterprise for PRC tax purposes.

11. INCOME TAX (continued)

Singapore

The subsidiary incorporated in Singapore is subject to the Singapore Corporate Tax rate of 17% for the year ended December 31, 2022.

Income before income taxes were generated in the following jurisdictions:

 

 

For the Year Ended December 31,

 

 

2020

 

 

2021

 

 

2022

 

 

US$

 

 

US$

 

 

US$

 

Domestic component

 

 

 

 

 

 

 

 

 

UAE

 

 

63,056,081

 

 

 

122,422,324

 

 

 

99,688,931

 

Foreign components

 

 

 

 

 

 

 

 

 

BVI

 

 

(976

)

 

 

(1,227

)

 

 

(3,810

)

Mainland PRC

 

 

(57,038,284

)

 

 

(35,920,356

)

 

 

(16,736,026

)

HK S.A.R.

 

 

65,233

 

 

 

286,843

 

 

 

593,949

 

Cayman Islands

 

 

(2,007,587

)

 

 

(2,152,866

)

 

 

(1,497,198

)

Singapore

 

 

—

 

 

 

(20,447

)

 

 

(409,018

)

Total

 

 

4,074,467

 

 

 

84,614,271

 

 

 

81,636,828

 

 

Income tax expense recognized in the consolidated statements of comprehensive income consists of current income tax expense.

The Company is headquartered in the UAE and the subsidiaries incorporated in UAE functions as the Company’s primary business operation center. Therefore, the Company uses the UAE’s income tax rate as applicable statutory income tax rate. The effective income tax rate for the years ended December 31, 2020, 2021 and 2022 was 21.1%, 2.4% and 3.2%, respectively. All the income tax expense was related to the subsidiaries located in PRC and Hong Kong, which were subject to the PRC statutory income tax at the rate of 25% for their taxable income and Hong Kong profits tax at the rate of 8.25% for first HK$2 million and remaining profits taxed at 16.5% on its taxable income generated from the operations in Hong Kong.

Deferred income tax assets and liabilities are as follows:

 

 

As of December 31,

 

 

2021

 

 

2022

 

 

US$

 

 

US$

 

Deferred tax assets

 

 

 

 

 

 

Operating lease liabilities

 

 

167,083

 

 

 

400,766

 

Impairment loss

 

 

—

 

 

 

179,479

 

Net operating loss carry forwards

 

 

28,779

 

 

 

287,345

 

Total gross deferred tax assets

 

 

195,862

 

 

 

867,590

 

Valuation allowance on deferred tax assets

 

 

(28,779

)

 

 

(466,824

)

Deferred tax assets, net of valuation allowance

 

 

167,083

 

 

 

400,766

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

167,083

 

 

 

400,766

 

Total gross deferred tax liabilities

 

 

167,083

 

 

 

400,766

 

 

 

 

 

 

 

 

Net deferred tax assets

 

 

—

 

 

 

—

 

 

11. INCOME TAX (continued)

Changes in valuation allowance are as follows:

 

 

As of December 31,

 

 

2021

 

 

2022

 

 

US$

 

 

US$

 

Balance at the beginning of the year

 

 

3,334

 

 

 

28,779

 

Additions

 

 

25,445

 

 

 

438,045

 

Reversals

 

 

—

 

 

 

—

 

Balance at the end of the year

 

 

28,779

 

 

 

466,824

 

 

A valuation allowance is provided against deferred income tax assets when the Group determines that it is more likely than not that the deferred income tax assets will not be utilized in the foreseeable future. In making such determination, the Group evaluates a variety of factors including the Group’s operating history, accumulated deficit or retained earnings, existence of taxable temporary differences and reversal periods.