XML 73 R11.htm IDEA: XBRL DOCUMENT
v2.4.0.6

4. Income taxes | 12 Months Ended
--- | ---
Dec. 31, 2012
Income taxes |
4 | Income taxes The Company is exempt from taxation in the British Virgin Islands (“BVI”). On March 16, 2007, the PRC National People’s Congress passed the Enterprise Income Tax Law (“Income Tax Law”), which became effective January 1, 2008 and applies a unified income tax rate for foreign invested enterprises and domestic enterprise. The Income Tax Law is effective immediately for companies previously subject to higher taxation rates and provides a five-year transition period from its effective date for those enterprises which were established before the effective date of the new tax law and previously entitled to a preferential tax treatment. On December 26, 2007, the State Council and on February 20, 2008 the Ministry of Finance issued implementation guidelines (“Guidelines”) setting out how the transition of tax rates will occur. The Guidelines state that those enterprises which enjoyed a preferential tax rate of 15% are eligible for a graduated rate increase to 25% over the 5-year period beginning from January 1, 2008. The applicable rates under such an agreements for such enterprises are 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011, 2012 and thereafter, respectively. In addition, foreign investment manufacturing enterprises which have not fully utilised any preferential tax treatments, such as tax holidays or reduced rates of taxation, will be able to continue to receive them during the transitional period. The Group has applied the applicable rates in relation to deferred tax balances. Euro Tech (Far East) Limited, Euro Tech (China) Limited and ChinaH2O.com Limited provided for Hong Kong profits tax at a rate of 16.5% in year 2012 (2011 and 2010: 16.5%) on the basis of their income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for profits tax purposes. Euro Tech Trading (Shanghai) Limited (“ETTS”), a subsidiary of the Company, provides for PRC Enterprise Income Tax at a rate of 25% (2011: 24%, 2010: 22%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2012, ETTS had an assessable loss carried forward of US$287,675 as agreed by the local tax authority to offset its profit for the forth coming years (2011: US$169,369). Such loss will expire in 5 years.
| In accordance with the relevant income tax laws and regulations applicable to foreign investment enterprises in the PRC, Shanghai Euro Tech Limited (“SET”), a subsidiary of the Company, is exempt from the PRC Enterprise Income Tax for two years starting from 2008, after offsetting losses brought forward, if any, followed by a 50% reduction for the next three years thereafter. As of December 31, 2012, SET had an assessable loss carried forward of US$482,340 as agreed by the local tax authority to offset its profit for the forth coming years (2011: US$387,543). Such loss will expire in 5 years. According to the relevant PRC tax rules and regulations, Shanghai Euro Tech Environmental Engineering Limited (“SETEE”) is exempt from the PRC Enterprise Income Tax for two years starting from 2007, after offsetting losses brought forward, if any, followed by a 50% reduction for the next three years thereafter. As of December 31, 2012, SETEE had an assessable loss carried forward of US$1,418,936 as agreed by the local tax authority to offset its profit for the forth coming years (2011: US$1,106,994). Such loss will expire in 5 years. Chongqing Euro Tech Rizhi Technology Co., Ltd, Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd and Guangzhou Euro Tech Environmental Equipment Co., Ltd provide for PRC Enterprise Income Tax at a rate of 25%, after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. According to the relevant PRC tax rules and regulations, Yixing Pact Environmental Technology Co., Ltd is registered in Shanghai as Foreign Owned Enterprise that are entitled to Enterprise Income Tax rate of 25% (2011 and 2010: 25%). VIEs of the Group provide for PRC Enterprise Income Tax at a rate of 25% (2011 and 2010: 25% ), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. Under the New Enterprise Income Tax Law and the implementation rules, profits of the PRC subsidiaries earned on or after January 1, 2008 and distributed by the PRC subsidiaries to foreign holding company are subject to a withholding tax at a rate of 10% unless reduced by tax treaty. Aggregate undistributed earnings of the Company’s subsidiaries located in the PRC that are available for distribution to the Company of approximately US$1.9 million at December 31, 2012 are intended to be reinvested, and accordingly, no deferred taxation has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to the Company. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax.
| Profit/(loss before) income taxes/(benefit):
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | US$’000 |  |  | US$’000 |  |  | US$’000 |
The PRC and Hong Kong |  |  | 13 |  |  |  | (1,204 | ) |  |  | (1,326 | )
| The provision for income taxes consists of:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | US$’000 |  |  | US$’000 |  |  | US$’000 |
Current tax expenses: |  |  |  |  |  |  |  |  |
The PRC and Hong Kong |  |  | 117 |  |  |  | (46 | ) |  |  | 233 |
Total current provision |  |  | 117 |  |  |  | (46 | ) |  |  | 233 |
Deferred tax benefit: |  |  |  |  |  |  |  |  |  |  |  |
The PRC and Hong Kong |  |  | 25 |  |  |  | (17 | ) |  |  | (79 | )
Total deferred provision |  |  | 25 |  |  |  | (17 | ) |  |  | (79 | )
| The principal reconciling items from income tax computed at the statutory rates and at the effective income tax rates are as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | US$’000 |  |  | US$’000 |  |  | US$’000 |
Computed tax using respective companies’ statutory tax rates |  |  | 31 |  |  |  | (263 | ) |  |  | (203 | )
Change in valuation allowances |  |  | 166 |  |  |  | 33 |  |  |  | 158 |
Under-provision for income tax in prior years |  |  | - |  |  |  | (10 | ) |  |  | - |
Non deductible expenses |  |  | (55 | ) |  |  | 177 |  |  |  | 199 |
Total provision for income tax at effective tax rate |  |  | 142 |  |  |  | (63 | ) |  |  | 154 |
| The components of deferred tax assets are as follows:
|  | 2012 |  |  | 2011 |
|  | US$’000 |  |  | US$’000 |
Tax losses |  |  | 977 |  |  |  | 811 |
Temporary differences |  |  | (24 | ) |  |  | 1 |
Less: Valuation allowances |  |  | (691 | ) |  |  | (525 | )
Net deferred tax assets |  |  | 262 |  |  |  | 287 |
ZHEJIANG |
Income taxes |
4 | Income taxes According to relevant PRC tax laws and regulations, entities incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) at a statutory rate of 25% or reduced national EIT rates for certain High and New Technology Enterprises (“HNTE”) on PRC taxable income. Zhejiang Tianlan Environmental Protection Technology Company Limited and Hangzhou Tianlan Environmental Protection Equipments Company Limited are classified as HNTE which enjoyed a preferential tax rate of 15%. Hangzhou Tianlan Environmental Engineering and Design Company Limited are subject to Enterprise Income Tax rate of 25%. The provision for income taxes consists of:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | RMB’000 |  |  | RMB’000 |  |  | RMB’000 |
Current PRC EIT: |  |  |  |  |  |  |  |  |
Domestic |  |  | 3,218 |  |  |  | 8,912 |  |  |  | 4,249 |
Income taxes |  |  | 3,218 |  |  |  | 8,912 |  |  |  | 4,249 |
Deferred tax benefit: |  |  | (784 | ) |  |  | (993 | ) |  |  | (1,481 | )
Total deferred taxes |  |  | (784 | ) |  |  | (993 | ) |  |  | (1,481 | )
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | RMB’000 |  |  | RMB’000 |  |  | RMB’000 |
Income before income taxes |  |  | 933 |  |  |  | 47,309 |  |  |  | 28,481 |
Computed tax using respective companies’statutory tax rates |  |  | 140 |  |  |  | 7,096 |  |  |  | 4,289 |
Under/(over)-provision for income tax in prior years |  |  | 1,358 |  |  |  | 512 |  |  |  | (562 | )
Tax effect on revenue not subject to tax |  |  | (56 | ) |  |  | (652 | ) |  |  | (1,027 | )
Tax effect on expenses not deductible for tax purposes |  |  | 992 |  |  |  | 963 |  |  |  | 68 |
Total provision for income tax at effective tax rate |  |  | 2,434 |  |  |  | 7,919 |  |  |  | 2,768 |
The components of deferred tax assets are as follows:
|  | 2012 |  |  | 2011 |
|  | RMB’000 |  |  | RMB’000 |
Tax losses |  |  | - |  |  |  | 348 |
Allowance for doubtful debts |  |  | 2,513 |  |  |  | 2,949 |
Net deferred tax assets |  |  | 2,513 |  |  |  | 3,297 |

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration