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Note 9 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | Note 9 - Income Taxes Taxes payable consisted of the following at December 31, 2018 and 2017:
|  | 2018 |  |  | 2017 |
Tax receivable |  | $ | - |  |  |  | - |
Income tax payable - current |  | $ | 584,874 |  |  | $ | 178,307 |
Income tax payable – noncurrent |  | $ | 3,351,652 |  |  | $ | 4,527,849 |
As of December 31, 2018 and 2017, noncurrent tax payable were $3.35 million and $4.53 million, respectively, consisting primarily of an income tax payable of $2.01 million and $2.50 million, respectively, arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below), and unrecognized tax benefit of $1.34 million and $2.03 million, respectively, as ASC 740 specifies that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities (see Note 2). The (benefit) provision for income taxes on income consisted of the following:
|  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (655,972 | ) |  | $ | 2,458,876 |
State |  |  | 2,400 |  |  |  | 2,400 |
PRC |  |  | 111,142 |  |  |  | 122,987 |
|  |  | (542,430 | ) |  |  | 2,584,263 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (41,138 | ) |  |  | 271,799 |
State |  |  | (76,350 | ) |  |  | (96,249 | )
Total (benefit) provision for income taxes |  | $ | (659,918 | ) |  | $ | 2,759,813 |
The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes:
|  | 2018 |  |  | 2017 |
Tax at federal statutory rate |  | $ | 974,405 |  |  | $ | 2,218,304 |
Foreign income taxed at different rates |  |  | 4,209 |  |  |  | (736,396 | )
ASC 740-10 uncertain tax position |  |  | (687,055 | ) |  |  | (135,293 | )
Tax exemption |  |  | (1,174,860 | ) |  |  | (2,045,545 | )
Global Intangible Low-Taxed Income |  |  | 542,258 |  |  |  | - |
Stock based compensation |  |  | (270,754 | ) |  |  | 471,323 |
Tax Cut and Jobs Act |  |  | 30,055 |  |  |  | 3,365,221 |
Others |  |  | (78,176 | ) |  |  | (377,801 | )
Total (benefit) provision for income taxes |  | $ | (659,918 | ) |  | $ | 2,759,813 |
The following presents the aggregate dollar effects of the Company’s tax exemption:
|  | 2018 |  |  | 2017 |
Aggregate dollar effect of tax holiday |  | $ | 1,174,860 |  |  | $ | 2,045,545 |
Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are comprised of the following:
|  | 2018 |  |  | 2017 |
Non-Current Deferred Tax Assets: |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 108,250 |  |  | $ | 106,277 |
Fed & CA amortization |  |  | 26,481 |  |  |  | 29,844 |
Stock compensation |  |  | 129,691 |  |  |  | 128,753 |
U.S. NOL |  |  | 196,430 |  |  |  | 129,679 |
Non-Current Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Prepaid expenses |  |  | (3,988 | ) |  |  | (50,566 | )
Fed & CA depreciation |  |  | (20,415 | ) |  |  | (25,026 | )
Net Non-Current Deferred Tax Assets before Valuation Allowance |  |  | 436,449 |  |  |  | 318,961 |
Less: Valuation Allowance |  |  | - |  |  |  | - |
Non-Current Deferred Tax Assets, Net: |  |  | 436,449 |  |  |  | 318,961 |
Total Deferred Assets, Net: |  | $ | 436,449 |  |  | $ | 318,961 |
Nova LifeStyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI was incorporated in the BVI. 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 provision related to the BVI tax jurisdiction where Nova Furniture BVI is domiciled. On April 24, 2013, the Company acquired all outstanding shares of Bright Swallow, which is incorporated in BVI. Generally, there is no income tax for a company domiciled in the BVI. For U.S. Federal income tax purpose, the Company has no net operating loss, or NOL carryforwards at December 31, 2018 and 2017. For U.S. California income tax purpose, the Company has net operating loss, or NOL carryforwards, of approximately $2.81 million and $1.86 million, at December 31, 2018 and 2017, respectively. On December 22, 2017, the Tax Cut and Jobs Act (“Tax Act”) was signed into law. The Tax Act introduced a broad range of tax reform measures that significantly change the federal income tax laws. The provisions of the Tax Act that may have significant impact on the Company include the permanent reduction of the corporate income tax rate from 35% to 21% effective for tax years including or commencing on January 1, 2018, one-time transition tax on post-1986 foreign unremitted earnings, provision for Global Intangible Low-Taxed Income (“GILTI”), deduction for Foreign Derived Intangible Income (“FDII”), repeal of corporate alternative minimum tax, limitation of various business deductions, and modification of the maximum deduction of net operating loss with no carryback but indefinite carryforward provision. Many provisions in the Tax Act are generally effective in tax years beginning after December 31, 2017. To the extent that portions of its U.S. taxable income, such as Subpart F income or GILTI, are determined to be from sources outside of the U.S., subject to certain limitations, the Company may be able to claim foreign tax credits to offset its U.S. income tax liabilities. Any remaining liabilities are accrued in the Company’s consolidated statements of comprehensive income and estimated tax payments are made when required by U.S. law. At December 31, 2017, the Company reflected the provisional income tax effects of the Tax Act under Accounting Standards Codification Topic 740, Income Taxes. The Company has recorded a provisional tax expense in the Statement of Comprehensive Income of approximately $3.37 million, comprised of approximately $3.27 million tax expense from recording the estimated one-time transition tax on post-1986 foreign unremitted earnings and $0.09 million of tax expense from remeasurement of U.S. deferred taxes using the relevant tax rate at which the Company expects them to reverse in the future. The Company has elected to pay the one-time transition tax over eight years commencing April 2018, in lieu of paying in a single lump sum. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in our consolidated financial statements as of December 31, 2017. As the Company collected and prepared necessary data, and interpreted the additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, the Company made adjustments, over the course of the year, to the provisional amounts including refinements to deferred taxes. The accounting for the tax effects of the Tax Act has been completed in the fourth quarter of 2018, and an adjustment of $324,000 to the provisional tax expense was required. On September 19, 2013, Bright Swallow moved the office from Macau to Hong Kong, which is subject to a 16.5% corporate income tax. Nova Macao is an income tax-exempt entity incorporated and domiciled in Macao. On January 1, 2017, we adopted Accounting Standards Update No. 2016-09 (“ASU 2016-09”) and as a result, we recorded a debit of $0.38 million, tax-effected, to retained earnings due to the realization of unrealized excess tax benefits.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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