XML 41 R25.htm IDEA: XBRL DOCUMENT v3.25.1
INCOME TAX
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAX

NOTE 16 – INCOME TAX

 

CETY Europe

 

CETY Europe is one of the Company’s subsidiaries in Italy, and is subject to 24% corporate income tax rate.

 

Hong Kong

 

CETY HK is incorporated in Hong Kong and is 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. The applicable tax rate for the first HKD 2 million of assessable profits is 8.25% and assessable profits above HKD $2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong, effective from the year of assessment 2023/2024.

 

CETY HK 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

 

Under the Enterprise Income Tax (“EIT”) Law of the PRC, domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified 25% EIT rate while preferential tax rates, tax holidays, and even tax exemption may be granted on case-by-case basis. From January 1, 2022 to December 31, 2024, small and low-profit enterprises with annual taxable income exceeding RMB 1 million but not more than RMB 3 million, the actual income to be taxed will be at 25% of annual taxable income, and the corporate income tax is paid at the rate of 20%.

 

The current PRC EIT Law imposes a 10% withholding income tax for dividends distributed by foreign invested enterprises to their immediate holding companies outside the PRC. A lower withholding tax rate will be applied if there is a tax treaty arrangement between the PRC and the jurisdiction of the foreign holding company. Distributions to holding companies in Hong Kong that satisfy certain requirements specified by the PRC tax authorities, for example, will be subject to a 5% withholding tax rate. There were no provisions for income tax for CETY HK.

 

 

The following table reconciles the statutory tax rate to the Company’s effective tax rate:

 

  

For the year ended

December 31,2024

 
Federal statutory tax expense (benefit)   (21.00)%
State statutory   (5.82)%
Tax rate difference   2.54%
Permanent difference   0.13%
Change in valuation allowance   24.15%
Effective tax rate   0.00%

 

The components of deferred tax assets (liabilities) are as follows:

 

  

As of

December 31, 2024

 
Deferred tax:     
Allowance for doubtful accounts  $95,922 
Net operating loss (“NOL”) carrying forwards   8,189,863 
Operating lease liabilities, net of right of use assets   2,014 
Warrant liabilities   

27,980 

 
Total deferred tax assets, net   

8,315,779

 
Less: valuation allowance   (8,281,784)
Total deferred tax assets, net   33,995 
      
Deferred tax liability:  $

33,995

 
License and Patents  $- 
Deferred tax liability, net of deferred tax assets   - 

 

The Company evaluates its valuation allowance requirements at the end of each reporting period by reviewing all available evidence, both positive and negative, and considering whether, based on the weight of that evidence, a valuation allowance is needed. When circumstances cause a change in management’s judgement about the realizability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in income from operations. The future realization of the tax benefit of an existing deductible temporary difference ultimately depends on the existence of sufficient taxable income of the appropriate character within the carry forward period available under applicable tax law. As of December 31, 2024, the Company’s PRC operating entities had $0.78 million net operating loss that can be carried forward to offset future taxable income for five years from the year the loss is incurred; the Company’s US parent had $34.16 million net operating loss that can be carried forward, for federal income tax purposes, NOLs arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable income and may be carried forward indefinitely; for California income tax purposes, the entire NOL of 13.62 million can be carried forward up to 20 years; the Company’s Italy operating entity had $112,435 net operating loss that can be carried forward indefinitely to offset future taxable income, losses arising in the first three years of activity can be offset with 100% of taxable income, after that, tax losses can only be offset with taxable income for an amount not exceeding 80% of the taxable income. As of December 31, 2024 due to uncertainties surrounding future utilization on these NOLs, the Company recorded valuation allowance of $8.28 million, respectively, against the deferred tax assets based upon management’s assessment as to their realization.

 

As of December 31, 2024 and 2023, the Company had no significant uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest and penalties related to significant uncertain income tax positions in other expense if any; however, there were no such interest and penalties as of December 31, 2024 and 2023.