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INCOME TAXES | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
INCOME TAXES |
| 16 | INCOME TAXES
The components of income (loss) before income taxes, equity in net income (loss) of equity method investee and non-controlling interest are as follows:
|  | Year ended December 31, |
|  | 2013 |  |  | 2014 |  |  | 2015 |
Domestic |  | $ | (522 | ) |  | $ | (40,612 | ) |  | $ | (24,350 | )
Foreign |  |  | 1,311 |  |  |  | 7,887 |  |  |  | (3,925 | )
|  | $ | 789 |  |  | $ | (32,725 | ) |  | $ | (28,275 | )
The Company is tax exempt in the Cayman Islands. Under the current Mauritius law and Hong Kong Inland Revenue Ordinance, the income of Actions Semiconductor Mauritius, Actions Hong Kong and Artek Microelectronics Hong Kong are subject to taxation in Mauritius and Hong Kong, respectively; however, up to December 31, 2015, all of these entities have not had any taxable profits. Actions Semiconductor Shanghai, Actions Microelectronics Hong Kong and Actions Capital BVI. have been loss making since their incorporation. Mavrix HK and Mavrix Shanghai have been loss making since the date of acquisition. Effective January 1, 2008, the Enterprise Income Tax of the People’s Republic of China (“EIT Law”) was implemented. The new law requires that:
1. | For all resident enterprises, domestic or foreign, the unified Enterprise Income Tax (“EIT”) rate is 25%.
2. | Enterprises that are categorized as the "High Tech Enterprise" can enjoy a reduced tax rate of 15%.
Actions Semiconductor Zhuhai On October 10, 2014, Actions Semiconductor Zhuhai successfully renewed its certificate of "High Tech Enterprises" with effect from January 1, 2014. As a result, the applicable tax rate continued to be 15% for the years ended December 31, 2015, 2016 and 25% thereafter, unless the Group continues its status and receives certification as a “High Tech Enterprises” by the end of 2017. In December 2013, Actions Semiconductor Zhuhai was named as “Key Integrated Circuit Design Enterprise” by PRC Tax authority with effective from December 2014. As a result, the applicable tax rate is 10% for the years ended December 31, 2013 and 2014. Actions Semiconductor Zhuhai was not granted as “Key Integrated Circuit Design Enterprise” by the end of 2015. Artek Microelectronics Shenzhen On November 5, 2012, certificate of "High Tech Enterprises" was granted to Artek Microelectronics Shenzhen. As a result, the applicable tax rate was 15% for the years ended December 31, 2012, 2013 and 2014. Artek Microelectronics Shenzhen was not granted as a "High Tech Enterprises" by the end of 2015. As a result, the applicable tax rate was 25% for the years ended December 31, 2015 and thereafter. Tax residency Uncertainties exist with respect to how the EIT applies to our overall operations, and more specifically, with regard to tax residency status. EIT Law includes a provision specifying that legal entities organized outside China will be considered residents for Chinese income tax purposes if their place of effective management or control is within China. The Implementation Rules to the EIT Law provide that non-resident legal entities will be considered as PRC tax residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. occurs within China. Additional guidance is expected to be released by the Chinese government in the near future that may clarify how to apply this standard to taxpayers. Except Mavrix, whose place of effective management is in Shanghai, the Group determined that the legal entities organized outside China should not be treated as PRC tax residents for EIT Law purposes as the places of effective management are outside China. If one or more of other legal entities organized outside China were characterized as PRC tax resident, then the additional tax cost might be significant. The Company's calculation of income taxes generally reflects the Company's status as a non-PRC tax resident company. The tax residency of a company is normally a question of fact. For a company which has been established outside the PRC, will be treated as a PRC tax resident if the location of effective management of the Company is in the PRC. PRC for this purpose does not include Hong Kong, Macao, or Taiwan. An additional consequence of the Company and/or its non-PRC subsidiaries being tax resident in the PRC would be the taxability in the PRC of the non-PRC tax resident recipients of certain payments made by the Company. This may include dividends, interest, and royalties. The Company, which has subsidiaries that are tax residents in the PRC, will be subject to the PRC dividend withholding tax of 10% when and if undistributed earnings are declared to be paid as dividends commencing on January 1, 2008 to the extent those dividends are paid out of profits that arose on or after January 1, 2008. The Company's tax provision includes $3,589, $919 and $715 of income tax expense for the 5%, 5% and 10% dividend withholding tax on the balance of distributable profits that arose on or after January 1, 2008 within its PRC subsidiaries as of the balance sheet date for the years ended December 31, 2013, 2014 and 2015 respectively. The current and deferred components of the income tax (expense) credit appearing in the consolidated statements of operations are as follows:
|  | Year ended December 31, |
|  | 2013 |  |  | 2014 |  |  | 2015 |
Current tax |  | $ | (124 | ) |  | $ | (1,780 | ) |  | $ | (48 | )
Deferred tax |  |  | (279 | ) |  |  | 3,576 |  |  |  | 204 |
|  | $ | (403 | ) |  | $ | 1,796 |  |  | $ | 156 |
The Group's deferred tax assets and liabilities as at December 31, 2014 and 2015 are attributable to the following:
|  | At December 31, |
|  | 2014 |  |  | 2015 |
Expenditures deductible for tax purpose in future years |  |  |  |  |  |  |  |
- Accrued legal and professional fees |  | $ | 14 |  |  | $ | 1 |
- Accrued bonus |  |  | 56 |  |  |  | 70 |
- Other |  |  | 1,098 |  |  |  | 1,060 |
Tax losses |  |  | 9,516 |  |  |  | 15,807 |
Depreciation and amortization |  |  | 64 |  |  |  | - |
Total deferred tax assets |  | $ | 10,748 |  |  | $ | 16,938 |
Valuation allowance |  |  | (9,516 | ) |  |  | (15,807 | )
Deferred tax assets |  |  | 1,232 |  |  |  | 1,131 |
Interest income taxable for tax purpose in future years |  |  | (160 | ) |  |  | (155 | )
Deferred tax liability arising from withholding tax on undistributed profits |  |  | (919 | ) |  |  | (715 | )
Total deferred tax liabilities |  |  | (1,079 | ) |  |  | (870 | )
Deferred tax (liabilities) assets, net |  | $ | 153 |  |  | $ | 261 |
The following is the analysis of deferred tax balances for reporting purposes:
|  | At December 31, |
|  | 2014 |  |  | 2015 |
Deferred tax assets |  |  |  |  |  |  |  |
Current |  | $ | 1,179 |  |  | $ | 938 |
Non-current |  |  | 53 |  |  |  | 193 |
|  | $ | 1,232 |  |  | $ | 1,131 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Current |  | $ | (160 | ) |  | $ | (155 | )
Non-current |  |  | (919 | ) |  |  | (715 | )
|  |  | (1,079 | ) |  |  | (870 | )
Deferred tax (liabilities) assets, net |  | $ | 153 |  |  | $ | 261 |
Movement of valuation allowance:
|  | 2013 |  |  | 2014 |  |  | 2015 |
At the beginning of the year |  | $ | 3,535 |  |  | $ | 5,217 |  |  | $ | 9,516 |
Change for the year |  |  | 1,682 |  |  |  | 4,299 |  |  |  | 6,291 |
At the end of the year |  | $ | 5,217 |  |  | $ | 9,516 |  |  | $ | 15,807 |
A valuation allowance has been provided for the tax loss of $24,530, $8,285, $1,956, $24,414, $10,663 and $322 of Actions Semiconductor Shanghai, Actions Semiconductor Zhuhai, Artek Microelectronics Shenzhen, Actions Technology Zhuhai, Actions Hong Kong and Actions Microelectronics Zhuhai respectively since realization of the recorded deferred tax assets is dependent on generating sufficient taxable income. Tax loss of $3,665, $6,528, $7,612, $46,256, $22,961, $37, $1,099 and $10,663 may carry forward till 2016, 2017, 2018, 2019, 2020, 2023, 2025 and indefinitely, respectively. As the management does not believe that it is more likely than not that all of the deferred tax asset attributable to the tax losses of Actions Semiconductor Shanghai, Actions Semiconductor Zhuhai, Artek Microelectronics Shenzhen, Actions Technology Zhuhai, Actions Microelectronics Zhuhai and Actions Hong Kong will be realized, valuation allowance of $5,217, $9,516 and $15,807 has been established as of December 31, 2013, 2014 and 2015, respectively for the related deferred tax asset of these subsidiaries. The additional tax that would have been payable in the absence of the tax exemption and preferential income tax rate amounts to approximately $930, nil, and $1,508 for the years ended December 31, 2013, 2014 and 2015, respectively. It represents an increase in the basic and diluted loss per ordinary share of $0.005 for the years ended December 31, 2015; and a decrease in the basic and diluted earnings per ordinary share of $0.002 for the year ended December 31, 2013. The Group has made its assessment of the level of tax authority for each tax position (including the potential application of interest and penalties) based on the technical merits, and has measured the unrecognized tax benefits associated with the tax positions. Based on the evaluation by the Group, it is concluded that there are no significant uncertain tax positions requiring recognition in the consolidated financial statements. The Group classifies interest and/or penalties related to unrecognized tax benefits as a component of income tax expense; however, as of December 31, 2014 and 2015, there were no interest and penalties related to uncertain tax positions. The Group has no material unrecognized tax benefit which would favorably affect the effective income tax rate in the next twelve months. The Group does not anticipate any significant increases or decreases to its liability for unrecognized tax benefit within the next twelve months. The tax positions for the years 2013 to 2015 and years 2008 to 2015 may be subject to examination by the PRC and Hong Kong tax authorities, respectively. A reconciliation between the provision for income tax computed by applicable PRC enterprise income tax rate to income (loss) before income taxes, equity in net (loss) income of equity method investees and non-controlling interest, and actual provision for income taxes is as follows:
|  | Year ended December 31, |
|  | 2013 |  |  | 2014 |  |  | 2015 |
PRC tax rate |  |  | 25 | % |  |  | 25 | % |  |  | 25 | %
Tax provision (credit) at PRC enterprise income tax rate |  | $ | 197 |  |  | $ | (8,181 | ) |  | $ | (7,068 | )
Expenses not deductible for tax purpose |  |  | 403 |  |  |  | 3,701 |  |  |  | 1,879 |
Share-based compensation not deductible for tax purpose |  |  | 123 |  |  |  | 11 |  |  |  | 36 |
Income not taxable for tax purposes |  |  | (1,005 | ) |  |  | (5,146 | ) |  |  | (142 | )
Net change in valuation allowance |  |  | 1,682 |  |  |  | 4,299 |  |  |  | 6,291 |
Effect of tax exemption and preferential income tax rate granted to PRC subsidiaries |  |  | (930 | ) |  |  | 3,857 |  |  |  | (1,508 | )
Effect of the different income tax rates in other jurisdictions |  |  | 204 |  |  |  | 301 |  |  |  | 196 |
Effect of withholding tax on undistributed earnings |  |  | 400 |  |  |  | (762 | ) |  |  | (205 | )
Utilization of tax loss previously not recognized |  |  | (685 | ) |  |  | - |  |  |  | - |
(Over provision) under provision in prior year |  |  | (78 | ) |  |  | (90 | ) |  |  | 32 |
Others |  |  | 92 |  |  |  | 214 |  |  |  | 333 |
Income tax expense(credit) |  | $ | 403 |  |  | $ | (1,796 | ) |  | $ | (156 | )

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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