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Taxes | 6 Months Ended
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Jun. 30, 2025
Taxes [Abstract] |
Taxes | Note 9 – Taxes Income Tax United States GDC and AIC are corporations organized in the state of Nevada and operate primarily in the state of New York. As a result, they are subject to U.S. federal corporate income tax as well as state and local income taxes in New York. For the six months ended June 30, 2025 and 2024, the applicable statutory tax rates were as follows:
| ● | Federal corporate income tax rate: 21%;
| ● | New York State corporate income tax rate: 6.5%;
| ● | New York City business corporation tax rate: 8.85%;
| ● | Metropolitan Transportation Business Tax Surcharge (MTA Tax): 30% of the New York State corporate franchise tax liability;
The Company’s effective tax rate may differ from the statutory rates due to various factors, including non-deductible expenses, tax credits, valuation allowances, and the impact of state and local taxes. Additionally, the Company evaluates uncertain tax positions in accordance with ASC 740, recognizing tax benefits only if it is more likely than not that the position will be sustained upon examination. British Virgin Islands Citi Profit BVI is incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed. Hong Kong Highlight HK is incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. Highlight HK is subject to Hong Kong profit tax at a rate of 8.25% for assessable profits on the first HK$2 million and 16.5% for any assessable profits in excess of HK$2 million for the three and six months ended June 30, 2025 and 2024. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. PRC Highlight WFOE and SH Xianzhui are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), qualified small and micro enterprises with annual taxable income not exceeding RMB 3 million are eligible for a preferential corporate income tax rate of 5% until December 31, 2027. This preferential rate is applied in accordance with relevant Chinese tax laws and regulations, and may be adjusted by the authorities from time to time. The current and deferred components of income tax expenses from continuing operations appearing in the unaudited interim condensed consolidated statements of operations are as follows:
|  | For the six months ended June 30, |
|  | 2025 |  |  | 2024 |
Current tax expenses |  | (unaudited) |  |  | (unaudited) |
Federal |  | $ | (20,000 | ) |  | $ | - |
State |  |  | (120,832 | ) |  |  | - |
Total current tax expenses |  | $ | (140,832 | ) |  | $ | - |
Deferred tax benefits |  |  |  |  |  |  |  |
Federal |  | $ | 153,911 |  |  | $ | 21,918 |
State |  |  | - |  |  |  | - |
Total deferred tax benefits |  | $ | 153,911 |  |  | $ | 21,918 |
Total benefits for income taxes |  | $ | 13,079 |  |  | $ | 21,918 |
The Company is subject to U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2022 to 2024 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates:
|  | For the six months ended June 30, 2025 |  |  | For the six months ended June 30, 2024 |
(unaudited) |  | (unaudited) |
Statutory tax rate |  |  |  |  |  |
Federal |  |  | 21.00 | % |  |  | 21.00 | %
State (net of federal benefit) |  |  | 13.47 | % |  |  | - |
Foreign tax |  |  | (0.00 | )% |  |  | (1.44 | )%
Amortization of intangible assets |  |  | (10.57 | )% |  |  | - |
Change in valuation allowance |  |  | (27.92 | )% |  |  | (19.56 | )%
Others |  |  | 3.49 | % |  |  | (0.28 | )%
Effective tax rate |  |  | (0.53 | )% |  |  | (0.28 | )%
As of June 30, 2025 and December 31, 2024, income tax payable to US tax authorities was $282,642 and $141,810, respectively. As of June 30, 2025 and December 31, 2024, no income tax was payable to Chinese tax authorities. The principal components of the Company’s deferred income tax assets and liabilities as of June 30, 2025 and December 31, 2024 were as follows:
|  | June 30, |  |  | December 31, |
|  | 2025 |  |  | 2024 |
|  | (unaudited) |  |  |  |
Deferred tax assets |  |  |  |  |  |
Net operating losses carried forward |  | $ | 6,803,230 |  |  | $ | 6,105,138 |
Provision of credit loss on note receivable and loan receivable |  |  | 1,092,011 |  |  |  | 1,092,011 |
Impairment loss of intangible assets |  |  | 845,008 |  |  |  | 845,008 |
Amortization of intangible assets |  |  | 263,140 |  |  |  | - |
Lease liability |  |  | 438,114 |  |  |  | 605,169 |
Total deferred tax assets |  | $ | 9,441,503 |  |  | $ | 8,647,326 |
Less: Valuation allowance |  |  | (9,047,896 | ) |  |  | (8,020,571 | )
Deferred tax assets, net of valuation allowance |  | $ | 393,607 |  |  | $ | 626,755 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Right - Of - Use assets |  | $ | (393,607 | ) |  | $ | (465,347 | )
Amortization of intangible assets |  |  | - |  |  |  | (315,319 | )
Total deferred tax liabilities |  | $ | (393,607 | ) |  | $ | (780,666 | )
Total deferred tax liabilities, net |  | $ | - |  |  | $ | (153,911 | )
As of June 30, 2025, the Group had tax losses carry forwards of approximately $5.3 million from the entity in the PRC. The tax loss in the PRC can be carried forward for five years to offset future taxable profit and which will expire between 2028 and 2029 if not utilized. As of June 30, 2025, the Group had tax losses carry forwards of approximately $18.9 million from the entities in the U.S. The tax loss in the U.S. can be carried forward indefinitely. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s operating history and continued losses in the United States. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management reviews this valuation allowance periodically and makes changes accordingly.

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