XML 31 R20.htm IDEA: XBRL DOCUMENT
v3.19.2

14. INCOME TAXES | 6 Months Ended
--- | ---
Jun. 30, 2019
Income Tax Disclosure [Abstract] |
14. 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 six-month periods ended June 30, 2019 and 2018, 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 six-month periods ended June 30, 2019 and 2018. (c) Hong Kong HKJI, a subsidiary of Upper Class Group Limited, was incorporated in Hong Kong and 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 income tax has been made as it has no taxable income for the three-month and six-month periods ended June 30, 2019 and 2018. The applicable statutory tax rates for the three-month and six-month periods ended June 30, 2019 and 2018 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. On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued CaiShui [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 June 30, 2019 and December 31, 2018, the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are $230,022,318 and $240,563,868, 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 June 30, 2019 and December 31, 2018, 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 June 30, 2019 and December 31, 2018, the unrecognized WHT are $10,510,400 and $11,035,843, 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 2012 through 2018, HKJI did not report any taxable income. It did not file any income tax returns during these years except for 2014 and 2018. 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 and 2018 are currently subject to examination. The components of the provision for income tax benefit from continuing operations are:
| Three-Month Period Ended June 30, |  | Six-Month Period Ended June 30, |
| 2019 |  | 2018 |  | 2019 |  | 2018 |
Current taxes – PRC |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Deferred taxes – PRC |  |  | (365,983) |  |  |  | (1,883,241) |  |  |  | (1,761,120) |  |  |  | (3,076,987 | )
|  | $ | (365,983) |  |  | $ | (1,883,241) |  |  | $ | (1,761,120) |  |  | $ | (3,076,987 | )
The effective income tax rate differ from the PRC statutory income tax rate of 25% from continuing operations in the PRC as follows:
| Three-Month Period Ended June 30, |  | Six-Month Period Ended June 30,
Reconciliations | 2019 |  | 2018 |  | 2019 |  | 2018
Statutory income tax rate |  | 25 | % |  |  | 25 | % |  |  | 25 | % |  |  | 25 | % |
Non-taxable income,(Non-deductible expense) and change in valuation allowance |  | 8 | % |  |  | 3 | % |  |  | (1 | %) |  |  | (4 | %) |
Effective tax rate |  | 33 | % |  |  | 28 | % |  |  | 24 | % |  |  | 21 | % |
Significant components of the Company’s deferred tax assets and liabilities at June 30, 2019 and December 31, 2018 are as follows:
|  | June 30, |  |  | December 31, |
| 2019 |  |  | 2018 |
Deferred tax liabilities |  | $ | - |  |  | $ | - |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for obsolete and slow-moving inventories |  | $ | - |  |  | $ | 16,292 |
Impairment on property, plant and equipment |  |  | 3,525,701 |  |  |  | 3,696,332 |
Impairment on prepaid land lease |  |  | 838,671 |  |  |  | 840,284 |
Exploration costs |  |  | 1,810,977 |  |  |  | 1,813,965 |
Compensation costs of unexercised stock options |  |  | 171,672 |  |  |  | 194,016 |
PRC tax losses |  |  | 14,555,918 |  |  |  | 12,663,985 |
US federal net operating loss |  |  | 486,290 |  |  |  | 119,000 |
Total deferred tax assets |  |  | 21,389,229 |  |  |  | 19,343,874 |
Valuation allowance |  |  | (657,962 | ) |  |  | (313,016 | )
Net deferred tax asset |  | $ | 20,731,267 |  |  | $ | 19,030,858 |
The increase in valuation allowance for the three-month period ended June 30, 2019 is $330,005. The increase in valuation allowance for the three-month period ended June 30, 2018 is $28,499. The increase in valuation allowance for the six-month period ended June 30, 2019 is $344,946. The increase in valuation allowance for the six-month period ended June 30, 2018 is $55,595. There were no unrecognized tax benefits and accrual for uncertain tax positions as of June 30, 2019 and December 31, 2018.

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