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INCOME TAXES | 3 Months Ended
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Mar. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 13 – INCOME TAXES The Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC 740-10. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. (a) United States (“US”) United States 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 periods ended March 31, 2022 and 2021, and management believes that its earnings are permanently invested in the PRC. (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 periods ended March 31, 2022 and 2021. (c) Hong Kong 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 periods ended March 31, 2022 and 2021. The applicable statutory tax rates for the three-month periods ended March 31, 2022 and 2021 are 16.5%. There is no dividend withholding tax in Hong Kong. (d) PRC 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 March 31, 2022 and December 31, 2021, the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are $140,728,940 and $140,006,862, 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 March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, the unrecognized WHT are $5,963,592 and $5,932,051, 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 2017 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 2019, 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 (expense) from continuing operations are: Income Taxes - Schedule of Components of Income Tax Expense Benefit
|  | Three-Month Period Ended March 31,
|  | 2022 |  | 2021
Current taxes – PRC |  | $ | — |  |  | $ | — |
Deferred tax – PRC entities |  |  | 95,695 |  |  |  | 743,709 |
Deferred taxes – US entity |  |  | — |  |  |  | 15,957 |
Change in valuation allowance |  |  | — |  |  |  | (15,957 | )
Tax Expense Benefit |  | $ | 95,695 |  |  | $ | 743,709 |
Significant components of the Company’s deferred tax assets and liabilities at March 31, 2022 and December 31, 2021 are as follows: Income Taxes - Schedule of Deferred Tax Assets and Liabilities
|  | March 31, |  | December 31,
|  | 2022 |  | 2021
Deferred tax liabilities |  | $ | — |  |  | $ | — |
Deferred tax assets: |  |  |  |  |  |  |  |
Exploration costs |  |  | 1,961,124 |  |  |  | 1,952,783 |
PRC tax losses |  |  | 19,618,132 |  |  |  | 19,621,674 |
US federal net operating loss |  |  | 1,322,647 |  |  |  | 1,308,335 |
Total deferred tax assets |  |  | 22,901,903 |  |  |  | 22,882,792 |
Valuation allowance |  |  | (10,005,411 | ) |  |  | (9,982,758 | )
Net deferred tax asset |  | $ | 12,896,492 |  |  | $ | 12,900,034 |
The increase in valuation allowance for the three-month period ended March 31, 2022 is $22,653. The decrease in valuation allowance for the three-month period ended March 31, 2021 is $86,964. There were no unrecognized tax benefits and accrual for uncertain tax positions as of March 31, 2022 and December 31, 2021 and no amounts accrued for penalties and interest for the three months ended March 31, 2022 and 2021.

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- 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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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