v3.20.4
Income Taxes
 6 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 9 – INCOME TAXES


The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled. The Company’s PRC subsidiaries file their income tax returns online with PRC tax authorities. The Company conducts all of its businesses through its subsidiaries and affiliated entities, principally in the PRC.


The Company’s U.S. parent company is subject to U.S. income tax rate of 21% and files U.S. federal income tax return.  As of December 31, 2020, the U.S. entity had net operating loss (“NOL”) carry forwards for income tax purposes of $567,133. The NOL arising in tax years beginning after 2017 may reduce 80% of a taxpayer’s taxable income, and be carried forward indefinitely. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. Management believes the realization of benefits from these losses remains uncertain due to the parent Company’s limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance was provided.


The Company’s offshore subsidiary, Shuhai Skill (HK), a HK holding company is subject to 16.5% corporate income tax in HK. Shuhai Beijing received a tax holiday with a 15% corporate income tax rate since it qualified as a high-tech company. Tianjin Information, Xunrui, Guozhong Times, Guozhong Haoze, Guohao Century, Jingwei, Shuhai Nanjing, Zhangxun are subject to the regular 25% PRC income tax rate.


As of December 31, 2020, the Company has approximately $6.62 million of NOL from its HK holding company, PRC subsidiaries and VIEs that expire in calendar years 2020 through 2024. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the Company’s future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance as of December 31, 2020 and June 30, 2020.


The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the six months ended December 31, 2020 and 2019:


   2020   2019 
US federal statutory rates   (21.0)%   (21.0)%
Tax rate difference – current provision   (3.3)%   (4.0)%
Permanent difference    %   -%
Effect of PRC tax holiday   3.3%   10.0%
Valuation allowance   21.0%   15.0%
Effective tax rate   -%   -%

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended December 31, 2020 and 2019:


   2020   2019 
US federal statutory rates   (21.0)%   (21.0)%
Tax rate difference – current provision   (3.6)%   (4.0)%
Permanent difference    %   -%
Effect of PRC tax holiday   1.9%   10.0%
Valuation allowance   22.7%   15.0%
Effective tax rate   -%   -%

The income tax benefit for the six months ended December 31, 2020 and 2019 were approximately $330,600 and $179,700, respectively; the income tax benefit for the three months ended December 31, 2020 and 2019 were approximately $203,300 and $131,100, respectively; the income tax benefit was primarily related to losses generated from U.S. and PRC operations, but were offset by valuation allowance provided against its deferred tax assets.