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INCOME TAXES
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 7 — INCOME TAXES

 

Wetouch

 

Wetouch Technology Inc. files a U.S. federal income tax return.

 

BVI Wetouch

 

Under the current laws of the British Virgin Islands, BVI Wetouch, subsidiaries of Wetouch, is not subject to tax on its income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.

 

Hong Kong

 

HK Wetouch is incorporated in Hong Kong and is subject to profit taxes in Hong Kong at a rate of 16.5%.

 

PRC

 

Sichuan Wetouch and Sichuan Vtouch files income tax returns in the PRC. Effective from January 1, 2008, the PRC statutory income tax rate is 25% according to the Corporate Income Tax (“CIT”) Law which was passed by the National People’s Congress on March 16, 2007.

 

Under PRC CIT Law, domestic enterprises and Foreign Investment Enterprises (“FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis by local government as preferential tax treatment to High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for their HNTE status every three years. Pursuant to an approval from the local tax authority in October 2017, Sichuan Wetouch became a qualified enterprise located in the western region of the PRC, entitled it to a preferential income tax rate of 15% from October 11, 2017 to October 11, 2020.

 

On October 21, 2020, Sichuan Wetouch was granted on a case-by-case basis by Sichuan Provincial government as preferential tax treatment High and New Technology Enterprises (“HNTEs”), entitled to a reduced income tax rate of 15% beginning October 21, 2020 until October 20, 2023.

 

On March 30, 2023 an independent third party acquired all shares of Sichuan Wetouch.

 

Sichuan Vtouch is entitled to 25% of income tax rate.

 

The effective income tax rates for the three-month periods ended March 31, 2023 and 2022 were 33.5% and 28.1%, respectively.

 

The estimated effective income tax rate for the year ended December 31, 2023 would be similar to actual effective tax rate of the three-month periods ended March 31, 2023.