Income Taxes |
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| INCOME TAXES | NOTE 11. INCOME TAXES
United States
MGSD is a Nevada corporation that is subject to U.S. federal tax and state tax. On December 31, 2017 the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal corporate income taxes on dividends from foreign subsidiaries; (4) providing modification to subpart F provisions and new taxes on certain foreign earnings such as Global Intangible Low-Taxed Income (GILTI). Except for the one-time transition tax, most of these provisions went into effect starting January 1, 2018.
Samoa
MGSD Samoa was incorporated in Samoa and, under the current laws of Samoa, is not subject to income tax.
Hong Kong
MGSD HK was incorporated in Hong Kong and is subject to Hong Kong profits tax. MGSD HK is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable statutory tax rate is 16.5%. The Company did not have any income (loss) subject to the Hong Kong profits tax.
China
Tongzhilian is subject to a 25% standard enterprise income tax in the PRC. Due to the fact that Tongzhilian’s revenue exceeded the upper limit for small-scale taxpayers in last quarter, Tongzhilian has been converted to a general taxpayer. All income for the last tax year (from January 1, 2024, to December 31, 2024) is subject to a corporate income tax rate of 25%. Therefore, the company had accrued additional corporate income tax for the period from January to September of 2024 at a rate of 25%, amounting to $29,524.
A reconciliation of income before income taxes for domestic and foreign locations for the six months ended March 31, 2025 and 2024 is as follows:
The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows:
The difference between the PRC statutory income tax rate and the PRC effective tax rate was as follows:
The Company did not recognize deferred tax assets since it is not likely to incur taxes against which such deferred tax assets may be offset. The deferred tax would apply to MGSD in the U.S. and Tongzhilian in China.
The Company incurred losses from its United States operations during the six months ended March 31, 2025 and 2024 of $126,665 and $69,242. The Company’s United States operations consist solely of ownership of its foreign subsidiaries, and the losses arise from administration expenses. Accordingly, management provided a 100% valuation allowance of $67,977 against the deferred tax assets related to the Company’s United States operations as of March 31, 2025, because the deferred tax benefits of the net operating loss carry forwards in the United States are not likely to be utilized. The US valuation allowance has increased by $26,600 for the six months ended March 31, 2025.
The Company is subject to examination by the Internal Revenue Service (IRS) in the United States as well as by the taxing authorities in China, where the firm has significant business operations. The tax years under examination vary by jurisdiction. The table below presents the earliest tax year that remain subject to examination by major jurisdiction.
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