XML 33 R21.htm IDEA: XBRL DOCUMENT
v3.7.0.1

Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities | 3 Months Ended
--- | ---
Mar. 31, 2017
Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities [Text Block] |
15. | Income Taxes, Deferred Tax Assets and Deferred Tax Liabilities
(a) Income taxes in the condensed consolidated statements of comprehensive loss (income) The Company’s provision for income taxes expenses consisted of:
|  |  | Three months ended March 31, |
|  |  | 2016 |  |  | 2017 |
| PRC income tax: |  |  |  |  |  |
| Current | $ | - |  | $ | - |
| Deferred |  | (57,241 | ) |  | - |
|  | $ | (57,241 | ) | $ | - |
United States Tax China BAK is subject to a statutory tax rate of 35% under United States of America tax law. No provision for income taxes in the United States or elsewhere has been made as China BAK had no taxable income for the three months ended March 31, 2016 and 2017. Hong Kong Tax BAK Asia is subject to Hong Kong profits tax rate of 16.5% and did not have any assessable profits arising in or derived from Hong Kong for the three months ended March 31, 2016 and 2017 and accordingly no provision for Hong Kong profits tax was made in these periods. PRC Tax The Company’s subsidiaries in China are subject to enterprise income tax at 25% for the three months ended March 31, 2016 and 2017.
| A reconciliation of the provision for income taxes determined at the statutory income tax rate to the Company's income taxes is as follows:
|  |  | Three months ended March 31, |
|  |  | 2016 |  |  | 2017 |
| Loss before income taxes | $ | (1,960,399 | ) | $ | (2,068,216 | )
| United States federal corporate income tax rate |  | 35% |  |  | 35% |
| Income tax credit computed at United States statutory corporate income tax rate |  | (686,139 | ) |  | (723,876 | )
| Reconciling items: |  |  |  |  |  |
| Rate differential for PRC earnings |  | 146,434 |  |  | 161,427 |
| Non-deductible expenses |  | 66,495 |  |  | 70,523 |
| Share-based payments |  | 112,475 |  |  | 88,371 |
| Valuation allowance on deferred tax assets |  | 336,907 |  |  | 403,555 |
| Others |  | (33,413 | ) |  | - |
| Income tax credit | $ | (57,241 | ) | $ | - |
(a) Deferred tax assets and deferred tax liabilities The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2016 and March 31, 2017 are presented below:
|  |  | December 31, |  |  | March 31, |
|  |  | 2016 |  |  | 2017 |
| Deferred tax assets |  |  |  |  |  |
| Trade accounts receivable | $ | 692,736 |  | $ | 700,624 |
| Inventories |  | 254,852 |  |  | 294,462 |
| Property, plant and equipment |  | 373,287 |  |  | 376,322 |
| Net operating loss carried forward |  | 38,055,264 |  |  | 38,408,287 |
| Valuation allowance |  | (39,376,139 | ) |  | (39,779,695 | )
| Deferred tax assets, non-current | $ | - |  | $ | - |
| Deferred tax liabilities, non-current | $ | - |  | $ | - |
As of December 31, 2016 and March 31, 2017, the Company’s U.S. entity had net operating loss carry forwards of $103,580,741, respectively, of which $102,293 available to reduce future taxable income which will expire in various years through 2035 and $103,478,448 available to offset capital gains recognized in the succeeding 5 tax years and the Company’s PRC subsidiaries had net operating loss carry forwards of $7,213,329 and $8,620,109, respectively, which will expire in various years through 2021. Management believes it is more likely than not that the Company will not realize these potential tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance was provided against the full amount of the potential tax benefits. The Company did not provide for deferred income taxes and foreign withholding taxes on the cumulative undistributed earnings of foreign subsidiaries as of December 31, 2016 and March 31, 2017 of approximately of $2.0 million and $0.4 million, respectively. The cumulative distributed earnings of foreign subsidiaries were included in accumulated deficit and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes or applicable withholding taxes, related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if management concluded that such earnings will be remitted in the future. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or its withholding agent. The statute of limitations extends to five years under special circumstances, which are not clearly defined. In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The impact of an uncertain income tax positions on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes.
| The significant uncertain tax position arose from the subsidies granted by the local government for the Company’s PRC subsidiary, which may be modified or challenged by the central government or the tax authority. A reconciliation of January 1, 2017, through March 31, 2017 amount of unrecognized tax benefits excluding interest and penalties ("Gross UTB") is as follows:
|  |  | Gross UTB |  |  | Surcharge |  |  | Net UTB |
| Balance as of January 1, 2017 | $ | 7,061,140 |  | $ | - |  | $ | 7,061,140 |
| Decrease in unrecognized tax benefits taken in current period |  | (550,335 | ) |  | - |  |  | (550,335 | )
| Balance as of March 31, 2017 | $ | 6,510,805 |  | $ | - |  | $ | 6,510,805 |
As of December 31, 2016 and March 31, 2017, the Company had not accrued any interest and penalties related to unrecognized tax benefits.

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration