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Taxes | 12 Months Ended
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Sep. 30, 2021
Taxes |
Taxes | Note 13 — Taxes Corporation income tax (“CIT”) The Company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled. FAMI is incorporated in the Cayman Islands as an offshore holding company and is not subject to tax on income or capital gain under the laws of the Cayman Islands. Note 13 — Taxes (Continued) Corporation income tax (“CIT”) (Continued) Farmmi International is incorporated in Hong Kong as a holding company with no activities. Under the Hong Kong tax laws, an entity is not subject to income tax if no revenue is generated in Hong Kong. In China the Corporate Income Tax Law generally applies an income tax rate of 25% to all enterprises. Farmmi Agricultural and Farmmi Supply Chain and are subject to corporate income tax at a statutory rate of 25% on net income reported after certain tax adjustments. Nongyuan Network, Farmmi Technology, Farmmi E-Commerce and Farmmi Biotech are approved by local government as small-scaled minimal profit enterprises. Once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the part of its taxable income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and 3 million is subject to a reduced rate of 10%. FLS Mushroom, Nongyuan Network, Farmmi Agricultural, Farmmi Technology, Farmmi Food, Farmmi Biotech and Farmmi Supply Chain are entities with primary operating activities. Farmmi Enterprise, Farmmi Ecology and Farmmi Holdings are holding companies with no activities. Farmmi E-commenrce, Farmmi Medical Health, Farmmi Health Development, Yitang Mediservice and Yiting Meditech are dormant companies with no activities. Under the Enterprise Income Tax (“EIT”) Law of PRC, domestic enterprises and foreign investment enterprises 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. EIT is typically governed by the local tax authority in China. Each local tax authority at times may grant special tax treatment to local enterprises as a way to encourage specific agricultural industry and stimulate local economy. FLS Mushroom and Farmmi Food are engaged in agricultural industry and their income are tax exempted. Nongyuan Network, Farmmi Technology, Farmmi E-Commerce and Farmmi Biotech are subject to corporate income tax at a reduced rate of 5% as approved by local government as small-scaled minimal profit enterprises. Net income of $4.02 million, $3.84 million and $3.59 million was exempt from income tax for the years ended September 30, 2021, 2020 and 2019, respectively. The estimated tax savings as the result of the tax break for the years ended September 30, 2021, 2020 and 2019 amounted to $1,004,365, $960,097 and $898,597, respectively. Per share effect of the tax exemption were $0.01, $0.06 and $0.08 for the years ended September 30, 2021, 2020 and 2019, respectively. The following table reconciles PRC statutory rates to the Company’s effective tax rates for the years ended September 30, 2021, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the years ended September 30, |
​ |  | 2021 |  | 2020 |  | 2019 |
Statutory PRC income tax rate |  | 25.00 | % | 25.00 | % | 25.00 | %
Effect of income tax exemption (a) |  | (41.01) | % | (27.49) | % | (25.34) | %
Favorable tax rate impact (a) |  | (0.33) | % | (1.46) | % | 0.58 | %
Permanent difference |  | (8.18) | % | 0.00 | % | 0.26 | %
Changes of deferred tax assets valuation allowances | ​ | 1.96 | % | 5.27 | % | 0.48 | %
Non-PRC entities not subject to PRC income tax |  | 23.61 | % | 2.84 | % | (13.48) | %
Total |  | 1.05 | % | 4.16 | % | (12.50) | %
(a) | FLS Mushroom and Farmmi Food are engaged in agricultural industry and their income are tax exempted. Nongyuan Network, Farmmi Technology, Farmmi E-Commerce and Farmmi Biotech are subject to corporate income tax at a reduced rate of 5% as approved by local government as small-scaled minimal profit enterprises.
Note 13 — Taxes (Continued) Corporation income tax (“CIT”) (Continued) The provision for income tax from the Company’s continuing operations consists of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the years ended September 30,
​ |  | 2021 |  | 2020 |  | 2019
Current | ​ | $ | 25,571 | ​ | $ | 16,753 | ​ | $ | (29,813)
Deferred | ​ |  | — | ​ |  | — | ​ |  | —
Total | ​ | $ | 25,571 | ​ | $ | 16,753 | ​ | $ | (29,813)
​ Components of deferred tax assets from the Company’s continuing operations are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, |  | September 30,
​ | ​ | 2021 | ​ | 2020
Net operating loss carryforwards | ​ | $ | 13,569 |  | $ | —
Valuation allowance | ​ |  | (13,569) |  | ​ | —
Total | ​ | $ | — |  | $ | —
​ The deferred tax expense (benefit) is the change of deferred tax assets and deferred tax liabilities resulting from the temporary difference between tax basis and U.S. GAAP. Farmmi Agricultural had a cumulative net operating loss of approximately $54,000 as of September 30, 2021, which may be available to reduce future taxable income. Deferred tax assets were primarily the result of these net operating losses. As of each reporting date, management considers evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. On the basis of this evaluation, a full valuation allowance of $13,569 was recorded against the gross deferred tax asset balance at September 30, 2021. The amount of the deferred tax asset is considered unrealizable because it is more likely than not that Farmmi Agricultural will not generate sufficient future taxable income to utilize the net operating loss.

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