v3.25.2
Taxes
 12 Months Ended
Dec. 31, 2024
Taxes [Abstract]  
TAXES

NOTE 13 – TAXES

 

(a) Corporate income taxes

 

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

 

ReTo was incorporated in the British Virgin Islands and is exempt from paying income tax New REIT and Sunoro Holdings are registered in Hong Kong as holding companies.

 

The Company’s PRC subsidiaries are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the EIT Law, the corporate income tax rate applicable to all companies, including both domestic and foreign-invested companies, is 25%.

 

The following table reconciles income tax expense by statutory rate to the Company’s actual income tax expense:

 

  

For the Year Ended December 31,

 
   2024   2023   2022 
Income tax benefit computed based on PRC statutory income tax rate  $(2,078,144)  $(1,631,581)  $(1,621,594)
Effect of favorable income tax rate in certain entity in PRC   
-
    
-
    
-
 
Non-PRC entities not subject to PRC tax (1)    1,768,565    1,596,505    1,611,361 
Non-deductible expenses - permanent difference (2)    1,393    243    
-
 
Change in valuation allowance   308,186    34,833    10,233 
Effective tax (benefit) expense  $
-
   $
-
   $
-
 

 

(1) Represents the tax losses incurred from operations outside of China.
   
(2) Represents expenses incurred by the Company that were not deductible for PRC income tax.

 

The breakdown of the Company’s loss before income tax provision is as follows:

 

 

 

   For the Year Ended December 31, 
   2024   2023   2022 
Loss before income tax expense from China  $(1,238,315)  $(140,301)  $(40,933)
Loss before income tax expense from outside of China   (7,074,261)   (6,386,021)   (6,430,022)
Total loss before income tax provision  $(8,312,576)  $(6,526,322)  $(6,470,955)

Loss before income tax expense from outside of China represents the losses incurred by ReTo holdings companies incorporated outside of China.

 

The income tax provision (benefit) was nil for the years ended December 31, 2024, 2023 and 2022, respectively.

 

Deferred income taxes reflect the net effects of temporary difference between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The Company periodically evaluates the likelihood of the realization of deferred tax assets and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Due to continuous losses incurred, the Company provided full allowance on the deferred tax assets as of December 31, 2024 and 2023. 

 

Deferred tax asset  As of
December 31
2024		   As of
December 31
2023		 
Allowance for credit loss  $28,051   $922 
Tax loss carried forwards   414,904    152,840 
Deferred tax assets   442,955    153,762 
Valuation allowance   (442,955)   (153,762)
Deferred tax assets, net  $-   $- 

 

(b) VAT

 

The Company is subject to VAT for selling products in China. The applicable VAT rate is 13% for products sold in the PRC. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of the PRC, the Company pays VAT based on tax invoices issued.

 

(c) Taxes payable

 

The Company’s taxes payable consist of the following:

 

   As of
December 31,		   As of
December 31,		 
   2024   2023 
VAT tax payable  $71,796   $72,295 
Corporate income tax payable   170,370    175,157 
Land use tax and other taxes payable   7,462    6,681 
Total  $249,628   $254,133 

 

As of December 31, 2024 and 2023, the Company had taxes payable of approximately $0.2 million and $0.2 million, respectively, mostly related to the unpaid income tax and business tax in China. For the years ended December 31, 2024, 2023 and 2022, the Company has not received any penalty or interest charge notice from local tax authorities. Due to uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these unpaid tax balances. The final outcome of this tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of the statute of limitations. The Company believes it is likely that the Company can reach an agreement with the local tax authority to fully settle its tax payables in a short term but cannot guarantee such settlement will ultimately occur.