6.	Income taxes

Cayman Islands

The Company is incorporated in the Cayman Islands, and is not subject to income tax under the current laws of the Cayman Islands.

British Virgin Islands

BeyondSpring Ltd. and BVI Biotech are incorporated in the British Virgin Islands, and are not subject to income tax under the current laws of the British Virgin Islands.

U.S.

BeyondSpring US is incorporated in Delaware, the U.S. It is subject to corporate income tax at a rate of

35%.

BeyondSpring US had no taxable income for all years presented and therefore, no provisions for income taxes were recorded.

Australia

BeyondSpring Australia incorporated in Australia is subject to corporate income tax at a rate of

30%.

BeyondSpring Australia has no taxable income for all years presented and therefore, no provision for income taxes is required.

Hong Kong

BeyondSpring HK is incorporated in Hong Kong and is subject to Hong Kong Profits Tax at

16.5%

on its taxable income calculated in accordance with the relevant Hong Kong tax laws. BeyondSpring HK has no taxable income for all years presented and therefore, no provision for income taxes is required.

PRC

Wanchun Shenzhen and Wanchunbulin are PRC companies and are subject to PRC income tax at the statutory rate of

25%.

The components of losses before income taxes are as follows:

	Year Ended December 31,
	2014	2015	2016

Cayman Islands	58	489	894
U.S.	1,983	5,921	9,840
PRC	972	1,642	1,338
Australia	-	-	473

Net loss before income taxes	3,013	8,052	12,545

There were no provisions for current and deferred income taxes because the Company and all of its subsidiaries were losses making and were at cumulative losses for the years presented.

A reconciliation of the differences between income tax expenses and the amounts computed by applying the U.S. corporate income tax rate of

35%

is as follows:

	Year Ended December 31,
	2014		2015		2016

Net loss before income taxes	3,013		8,052		12,545

Expected income tax benefit	1,055		2,818		4,391
Tax rate differential	95		297		581
Non-deductible expenses	(240	)	(351	)	(152	)
Others	(5	)	28		(63	)
Change in valuation allowance	(905	)	(2,792	)	(4,757	)

Total income tax benefit	-		-		-

Net deferred tax assets as of

December

31,

2015

and

2016

consisted of the following:

	December 31,
	2015		2016
Deferred tax assets, non-current portion:
Net operating loss carryforward	3,811		8,317
Intangible asset	586		428
Deferral of tax deduction of R&D expense	-		409
Less: valuation allowance	(4,397	)	(9,154	)

Net deferred tax assets	-		-

Valuation allowances have been provided on the deferred tax assets where, based on all available evidence, it was considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. The Company recorded a full valuation allowance against deferred tax assets.

For the years ended

December

31,

2015

and

2016,

the increases in valuation allowance were

$2,369

and

$4,757,

respectively. The change in valuation allowance for the year ended

December

31,

2015

was primarily due to the net effect of an additional valuation allowance of

$2,792

recorded in the profit or loss against the deferred tax assets of subsidiaries with cumulative losses and a net decrease in valuation allowance of

$423

as a result of decrease in deferred tax assets arising from the decrease in deductible temporary differences following the Group’s additional investment in Wanchun Pharma in

2015.

The change in valuation allowance for the year ended

December

31,

2016

was primarily due to the additional valuation allowance of

$4,757

recorded in the profit or loss against the deferred tax assets of subsidiaries with cumulative losses.

As of

December

31,

2016,

the Company had U.S. and PRC tax loss carryforwards of approximately

$17,853

and

$648,

respectively. The U.S. unused tax losses can be carryforward for

years and will start to expire in

2033

if not utilized. Whereas the PRC unused tax losses can be carryforward for

years and

$617

will expire in

2020

if not utilized.

As of

December

31,

2015

and

2016,

the Company determined that it had no material unrecognized tax benefit and accordingly no material related interest and penalty. Management does not expect that the amount of unrecognized tax benefit will increase significantly within the next

months.

The Company’s U.S. subsidiary and Australian and PRC subsidiaries filed income tax returns in the U.S., Australia and PRC, respectively. BeyondSpring US is subject to U.S. federal and state income tax examination by tax authorities for tax years beginning in

2013.

BeyondSpring Australia’s

2016

tax returns are open to examination by Australian Taxation Office. For Wanchun Shenzhen and Wanchunbulin, their

2015

and

2016

tax returns are open to examination by the PRC taxing authorities.