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Income Taxes
 9 Months Ended
Sep. 30, 2014
Income Taxes [Abstract]  
Income Taxes

(16) Income Taxes

 

United States

 

Orient Paper and Shengde Holdings are incorporated in the State of Nevada and are subject to the U.S. federal tax and state statutory tax rates up to 34% and 0%, respectively.

 

PRC

 

Orient Paper HB and Orient Paper Shengde are PRC operating companies and are subject to PRC Enterprise Income Tax. Pursuant to the PRC New Enterprise Income Tax Law, Enterprise Income Tax is generally imposed at a statutory rate of 25%.

 

The provisions for income taxes for three months ended September 30, 2014 and 2013 were as follows:

 

  Three Months Ended 
  September 30, 
  2014  2013 
Provision for Income Taxes        
Current Tax Provision – PRC $1,019,837  $1,808,503 
Deferred Tax Provision – PRC  227,419   170,600 
Total Provision for Income Taxes $1,247,256  $1,979,103 

 

The provisions for income taxes for nine months ended September 30, 2014 and 2013 were as follows:

 

  Nine Months Ended 
  September 30, 
  2014  2013 
Provision for Income Taxes        
Current Tax Provision – PRC $3,055,355  $3,276,466 
Deferred Tax Provision – PRC  481,138   274,427 
Total Provision for Income Taxes $3,536,493  $3,550,893 

 

During the three months ended September 30, 2014 and 2013, the effective income tax rate was estimated by the Company to be 27.0% and 26.3%, respectively, while during the nine months ended September 30, 2014 and 2013, the effective income tax rate was estimated by the Company to be 27.2% and 27.2%, respectively. The effective tax rate is lower than the U.S. statutory rate of 35% primarily because the undistributed earnings of our PRC subsidiary Orient Paper Shengde and the VIE, Orient Paper HB are considered or are expected to be indefinitely reinvested offshore to support our future capacity expansion.

 

The Company has adopted ASC Topic 740-10-05, Income Taxes. To date, the adoption of this interpretation has not impacted the Company’s financial position, results of operations, or cash flows. The Company performed self-assessment and the Company’s liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed, which in the PRC is usually 5 years. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of September 30, 2014 and December 31, 2013, management considered that the Company had no uncertain tax positions affecting its consolidated financial position and results of operations or cash flows, and will continue to evaluate for any uncertain position in future. There are no estimated interest costs and penalties provided in the Company’s condensed consolidated financial statements for both the three months and the nine months ended September 30, 2014 and 2013, respectively. The Company’s tax positions related to open tax years are subject to examination by the relevant tax authorities and the major one is the China Tax Authority.