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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes [Abstract]  
INCOME TAXES

NOTE 10 - INCOME TAXES

 

Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

 

Liabilities are established for uncertain tax positions expected to be taken in income tax returns when such positions are judged to meet the “more-likely-than-not” threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of other expenses. Through December 31, 2022, the Company has not identified any uncertain tax positions that it has taken. U.S. income tax returns for the years ended December 31, 2019 through December 31, 2022 and the Chinese income tax return for the year ended December 31, 2022 are open for possible examination.

 

Under the current tax law in the PRC, the Company is and will be subject to the enterprise income tax rate of 25%.

  

There was no provision for income taxes for the years ended December 31, 2022 and 2021, respectively due to continued net losses of the Company.

 

Following is a reconciliation of income taxes calculated at the federal statutory rates to the provision for income taxes:

 

   Years Ended December 31, 
   2022   2021 
(Benefit) tax at statutory rate of 25%  $(973,717)  $(849,869)
Prior year refund received   -    - 
Other, primarily the difference in U.S. tax rates   8,416    8,440 
Change in valuation allowance   965,301    841,429 
Income tax expense  $-   $- 

 

The temporary differences which give rise to the deferred income tax assets and liability are as follows:

 

   December 31, 
   2022   2021 
Deferred income tax assets:        
Allowance for doubtful trade receivables  $4,184,882   $4,578,177 
Allowance for doubtful other receivables   6,787    8,052 
Inventory obsolescence reserve   34,921    137,549 
Stock compensation   3,201    3,201 
Expenses not deductible in current year   1,087,328    1,187,760 
Advances for intangible assets impairment   9,782,172    10,685,714 
Lease liability, net   349    376 
PRC net operating loss carry forward   5,036,114    5,779,437 
U.S. net operating loss carry forward   1,849,800    1,602,243 
Total deferred income tax assets   21,985,554    23,982,509 
Valuation allowance   (21,985,554)   (23,982,509)
Net deferred income tax asset  $-   $- 
Deferred income tax liability:          
Intangible assets  $754,698   $824,407 

 

As of December 31, 2022, the Company had net operating loss carryforwards for PRC tax purposes of approximately $20.1 million which are available to offset any future taxable income through 2026. Approximately $6.0 million of these carryforwards expired in December 2022. The Company also has net operating losses for United States federal income tax purposes of approximately $8.7 million of which $5.1 million is available to offset future taxable income, if any, through 2039, and $3.7 million are available for carryforward indefinitely subject to a limitation of 80% of taxable income for each tax year.

 

U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on December 22, 2017. The U.S. Tax Reform significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible or tax loss carry forwards are utilized.  Management considers projected future taxable income and tax planning strategies in making this assessment.  Based upon an assessment of the level of historical taxable income and projections for future taxable income over the periods on which the deferred tax assets are deductible or can be utilized, management believes it is not likely for the Company to realize all benefits of the deferred tax assets as of December 31, 2022 and 2021.  Therefore, the Company provided for a valuation allowance against its deferred tax assets of $21,985,554 and $23,982,509 as of December 31, 2022 and 2021, respectively.

 

The Company also incurred various other taxes, comprised primarily of business taxes, value-added taxes, urban construction taxes, education surcharges and others. Any unpaid amounts are reflected on the balance sheets as accrued taxes payable.