XML 29 R18.htm IDEA: XBRL DOCUMENT
v3.10.0.1

12. INCOME TAXES | 9 Months Ended
--- | ---
Sep. 30, 2018
Income Tax Disclosure [Abstract] |
12. INCOME TAXES | The Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC 740-10. (a) United States (“US”) Gulf Resources, Inc. may be subject to the United States of America Tax laws at a tax rate of 21%. No provision for the US federal income taxes has been made as the Company had no US taxable income for the three-month and nine-month periods ended September 30, 2018 and 2017, and management believes that its earnings are permanently invested in the PRC. On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted in law. With the new tax law, the corporation income tax rate is reduced from 35% to 21% and there is a one-time mandatory transition tax on accumulated foreign earnings. The Company computed this one-time mandatory transition tax on accumulated foreign earnings to be approximately $5.4 million. However, as the Company has available US federal net operating loss carry forwards and foreign tax credit to fully offset the mandatory inclusion of the accumulated foreign earnings, no net tax liability arose from the inclusion of these accumulated foreign earnings. (b) British Virgin Islands (“BVI”) Upper Class Group Limited, a subsidiary of Gulf Resources, Inc., was incorporated in the BVI and, under the current laws of the BVI, it is not subject to tax on income or capital gain in the BVI. Upper Class Group Limited did not generate assessable profit for the three-month and nine-month periods ended September 30, 2018 and 2017. (c) Hong Kong Hong Kong Jiaxing Industrial Limited, a subsidiary of Upper Class Group Limited, was incorporated in Hong Kong and is subject to Hong Kong profits tax. The Company is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provision for profits tax has been made as the Company has no assessable income for the three-month and nine-month periods ended September 30, 2018 and 2017. The applicable statutory tax rates for the three-month and nine-month periods ended September 30, 2018 and 2017 are 16.5%. There is no dividend withholding tax in Hong Kong. (d) PRC Enterprise income tax (“EIT”) for SCHC, SYCI and DCHC in the PRC is charged at 25% of the assessable profits. The operating subsidiaries SCHC, SYCI and DCHC are wholly foreign-owned enterprises (“FIE”) incorporated in the PRC and are subject to PRC Local Income Tax Law. The PRC tax losses may be carried forward to be utilized against future taxable profit for ten years for High-tech enterprises and small and medium-sized enterprises of science and technology and for five years for other companies. Tax losses of the operating subsidiaries of the Company may be carried forward for five years. On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a FIE prior to January 1, 2008 to foreign investor(s) in 2008 will be exempted from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT at 5% effective tax rate. As of September 30, 2018 and December 31, 2017, the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are $248,872,624 and $282,660,981, respectively. Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, as of September 30, 2018 and December 31, 2017, the Company has not recorded any WHT on the cumulative amount of distributable retained earnings of its foreign invested enterprises that are subject to WHT in China. As of September 30, 2018 and December 31, 2017, the unrecognized WHT are $11,453,529 and $14,133,049, respectively. The Company’s income tax returns are subject to the various tax authorities’ examination. The federal, state and local authorities of the United States may examine the Company’s income tax returns filed in the United States for three years from the date of filing. The Company’s US income tax returns since 2015 are currently subject to examination. Inland Revenue Department of Hong Kong (“IRD”) may examine the Company’s income tax returns filed in Hong Kong for seven years from date of filing. For the years 2011 through 2017, HKJI did not report any taxable income. It did not file any income tax returns during these years except for 2014. For companies which do not have taxable income, IRD typically issues notification to companies requiring them to file income tax returns once in every four years. The tax returns for 2014 are currently subject to examination. The components of the provision for income tax expense (benefit) from continuing operations are:
|  | Three-Month Period Ended September 30, |  | Nine-Month Period Ended September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Current taxes – PRC |  | $ | — |  |  | $ | 1,509,321 |  |  | $ | — |  |  | $ | 9,152,597 |
Deferred taxes – PRC |  |  | (7,181,521 | ) |  |  | — |  |  |  | (10,258,508 | ) |  |  | — |
|  | $ | (7,181,521 | ) |  | $ | 1,509,321 |  |  | $ | (10,258,508 | ) |  | $ | 9,152,597 |
The effective income tax expenses (tax benefit) differ from the PRC statutory income tax rate of 25% from continuing operations in the PRC as follows:
|  | Three-Month Period Ended September 30, |  | Nine-Month Period Ended September 30,
Reconciliations |  | 2018 |  | 2017 |  | 2018 |  | 2017
Statutory income tax rate |  |  | (25 | %) |  |  | 25 | % |  |  | (25 | %) |  |  | 25 | %
Non-deductible Non-taxable item |  |  | (2 | %) |  |  | 3 | % |  |  | — |  |  |  | 1 | %
Change in valuation allowance - US federal net operating loss |  |  | — |  |  |  | 3 | % |  |  | — |  |  |  | 1 | %
Effective tax rate |  |  | (27 | %) |  |  | 31 | % |  |  | (25 | %) |  |  | 27 | %
Significant components of the Company’s deferred tax assets and liabilities at September 30, 2018 and December 30, 2017 are as follows:
|  | September 30, |  | December 31,
|  | 2018 |  | 2017
Deferred tax liabilities |  | $ | — |  |  | $ | — |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for obsolete and slow-moving inventories |  | $ | — |  |  | $ | 10,980 |
Impairment on property, plant and equipment |  |  | 3,773,740 |  |  |  | 4,610,228 |
Exploration costs |  |  | 1,809,857 |  |  |  | 1,905,347 |
Compensation costs of unexercised stock options |  |  | 94,287 |  |  |  | 98,092 |
PRC tax losses |  |  | 10,559,743 |  |  |  | — |
US federal net operating loss |  |  | 83,400 |  |  |  | — |
Total deferred tax assets |  |  | 16,321,027 |  |  |  | 6,624,647 |
Valuation allowance |  |  | (177,687 | ) |  |  | (98,092 | )
Net deferred tax asset |  | $ | 16,143,340 |  |  | $ | 6,526,555 |
The increase in valuation allowance for each of the three-month periods ended September 30, 2018 and 2017 is $24,000 and $406,000, respectively. The increase in valuation allowance for the nine-month period ended September 30, 2018 is $79,595. The increase in valuation allowance for the nine-month period ended September 30, 2017 is $479,400. There were no unrecognized tax benefits and accrual for uncertain tax positions as of September 30, 2018 and December 31, 2017.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration