NOTE 13. INCOME TAXES 

British Virgin Islands (“BVI”)

Under the current laws of the BVI, the Company’s BVI subsidiary, Ispire International, is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in the BVI.

Hong Kong

Under the two-tiered profits tax rates regime for Hong Kong, the first 2 million HKD of profits of the qualifying entity will be taxed at 8.25%, and profits above HKD 2 million will be taxed at 16.5%.

United States

The Company and Aspire North America LLC are each subject to the federal income tax rate of 21% if in a taxable position.

Malaysia

Ispire Malaysia Sdn Bhd are subject to the standard corporate tax rate of 24% if in a taxable position. However, resident companies that qualify as small and medium-sized enterprises may benefit from a reduced tax rate of 15% on the first RM 150,000 of chargeable income and 17% on the next RM 450,000.

For the years ended June 30, 2025 and 2024 income (loss) before income taxes by major taxing jurisdiction consists of:

The provision for income taxes consisted of the following:

The reconciliation of the actual income taxes to the amount of tax computed by applying the aforementioned statutory tax rate to pre-tax income is as follows:

The Company’s effective tax rate for the years ended June 30, 2025 and 2024, was different from the United States statutory income tax rate due primarily to the U.S. and Malaysia subsidiaries being in a loss position and the Hong Kong subsidiary being in an income position. No tax benefit has been recognized for these current losses and the related carryforward losses of these subsidiaries, as a full valuation allowance has been established against the deferred tax asset arising from these losses.

As of June 30, 2025, the Company had unrecognized deferred tax assets totaling $20,210,191. Of this amount, $10,839,605 relates to federal, state, and foreign net operating loss carryforwards, which may provide future income tax benefits. These deferred tax assets are attributable to gross net operating loss carryforwards of $34,335,732 for federal, $45,842,049 for state and $1,754,463 for foreign jurisdictions.  In accordance with the Tax Cuts and Jobs Act enacted in December 2017, federal NOL carryforwards arising from tax years beginning after January 1, 2018 can be carried forward indefinitely, subject to a taxable income limitation. State net operating loss carryforwards will begin to expire in 2043, and foreign net operating loss carryforwards will begin to expire in 2034.

The amount of the valuation allowance as of June 30, 2025 was $18,617,103, resulting from an addition of $6,766,587 to the valuation allowance. Valuation allowances provided against the deferred tax assets are related to all net operating loss carryforwards, as the Company’s management does not believe that sufficient positive evidence exists to conclude that the benefits of such deferred tax assets are more likely than not to be realized in full.

Deferred tax assets and liabilities represent the future effects on income taxes that result from temporary differences and carryforwards that exist at the balance sheet date, and are measured using enacted rates and provisions of the tax law. Deferred tax assets are recognized for deductible temporary differences as well as tax attributes.

The Company generated Global Intangible Low-Taxes Income during the year. However, no corresponding U.S. federal income tax expense was recognized due to the utilization of net operating loss carryforwards. The Company will continue to monitor the impact of Global Intangible Low-Taxes Income on its future tax positions.

Significant components of the Company’s deferred tax liabilities and assets as of June 30, 2025 and 2024 are as follows:

Movement of valuation allowance:

The Company is subject to income taxes in the U.S. federal, state, and various foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. All of the Company’s tax years will remain open for examination by the US federal and state tax authorities from the date the returns are filed or are due, whichever is later. The Company does not have any tax audits or other issues pending.