v3.25.2
Income Tax
 3 Months Ended
Mar. 31, 2025
Income Tax [Abstract]  
INCOME TAX

16. INCOME TAX

 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

 

United States

 

The Company is subject to U.S. federal tax laws. On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. Accordingly, the Company has remeasured its deferred tax assets on its net operating loss carry forwards in the U.S at the lower enacted tax rate of 21%. However, this remeasurement had no effect on the Company’s income tax expense as the Company has provided a 100% valuation allowance on its deferred tax assets previously.

 

British Virgin Islands

 

Hongchang BVI was incorporated in the British Virgin Islands and is not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their stockholders, no British Virgin Islands withholding tax will be imposed.

 

Hong Kong

 

HK$2.0 million assessable profits will be subject to a lower tax rate of 8.25% and the excessive taxable income will continue to be taxed at the existing 16.5% tax rate. The two-tiered tax regime becomes effective from the assessment year of 2018/2019, which was on or after April 1, 2018. The application of the two-tiered rates is restricted to only one nominated enterprise among connected entities.

 

PRC

 

WFOE and its subsidiaries are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments.

 

Hongfu Food and Pucheng Green Health Food, primarily engaged in processing of agricultural products, are eligible for full exemption from corporate income tax under the tax preferential policies stipulated in the “EIT Laws,” with an effective tax rate of 0% during the relevant accounting period.

 

Income taxes in the PRC consisted of:

 

   For the 
   three months ended
March 31,		   Fiscal year ended
December 31,		 
   2025   2024   2023 
   US$   US$   US$ 
Income tax expense   157,881    -    - 
Deferred income tax benefit   (5,212)   (22,303)   (65,905)
Total income tax expense (benefit)  $152,669   $(22,303)  $(65,905)

 

The Company had an income tax expense of US$152,669 for the three months ended March 31, 2025, an income tax benefit of US$22,303 for the fiscal year ended December 31, 2024, and an income tax expense of US$65,905 for the fiscal year ended December 31, 2023.

Below is a reconciliation of the statutory tax rate to the effective tax rate:

 

   For the 
   three months ended
March 31,		   Fiscal year ended
December 31,		 
   2025   2024   2023 
   US$   US$   US$ 
PRC statutory income tax rates*   25.00%   25.00%   25.00%
Non-deductible expenses   
-
    (0.27)%   (0.34)%
Preferential tax rate reduction   (8.57)%   (1.2)%   
-
 
Change in valuation allowance   (7.20)%   (18.97)%   (3.80)%
Actual income tax rate   9.23%   4.56%   20.85%

 

*As the Company’s business operation mainly concentrated in PRC, the Company determined to apply PRC statutory tax rate in reconciliation of the statutory tax rate to the effective tax rate.

 

Deferred tax assets consisted of the following:

 

   As of 
   March 31,   December 31, 
   2025   2024   2023 
   US$   US$   US$ 
Land use right amortization   91,714    85,865    65,858 
Appraisal appreciation   12,503    
-
    
-
 
Net operating losses carried forward in the PRC   15,931    148,993    101,852 
Net operating losses carried forward in the U.S.   221,318    193,608    150,645 
Totals   341,466    428,466    318,355 
Less: Valuation allowance   (237,249)   (342,601)   (252,497)
Deferred tax assets, net   104,217    85,865    65,858