v3.26.3
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 16 - INCOME TAXES

 

The company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled. ESG China Limited and Hainan ESG Tech are holding companies without operations.

 

The Company’s U.S. parent company is subject to U.S. income tax rate of 21% and files U.S. federal income tax return. As of December 31, 2025 and 2024, the U.S. entity had net operating loss (“NOL”) carry forwards for income tax purposes of $456,665 and $195,027. Management believes the realization of benefits from these losses remains uncertain. Accordingly, a 100% deferred tax asset valuation allowance was provided.

 

In China the Corporate Income Tax Law generally applies an income tax rate of 25% to all enterprises. In corporate income tax article 86, “Regulations for the Implementation of the Enterprise Income Tax Law” article 27(1) of stipulate: the income of an enterprise engaged in agriculture, forestry, animal husbandry, and fishery projects may be exempted or reduced from income tax. Refer to: (1)Enterprises are exempted from enterprise income tax on income derived from the following items: 1. Planting of vegetables, grains, potatoes. Anhui Allied United Mushroom Technology and Anhui Allied United Mushroom are engaged in agricultural production in China, and their income tax are exempted. AUFP is not exempt for income tax. Net income and net loss were not offset among the operating subsidiaries. Net income of $817,802 and $3,281,821 were exempt from income tax for the years ended December 31, 2025 and 2024, respectively. The estimated tax savings as the result of the 25% tax break for the years ended December 31, 2025 and 2024 amounted to $204,451 and $820,455, respectively. The deferred tax assets were $641,840 and $517,978 as of December 31, 2025 and 2024, respectively. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance as of December 31, 2025 and 2024. The Company’s management reviews this valuation allowance periodically and makes adjustments as necessary.

 

There were no uncertain tax positions as of December 31, 2025 and 2024.

 

As of December 31, 2025 and 2024, the Company had net operating loss (“NOL”) carryforwards of $11,550,599 and $10,287,694, respectively, in PRC. The NOL carryforwards will begin to expire in the PRC in the calendar year 2026 through 2030, if not utilized $1,084,680 was expired for the year ended December 31,2025.

 

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended December 31, 2025 and 2024:

 

          
   2025   2024 
US federal statutory rates   (21.0%)   (21%)
Tax rate difference between PRC and U.S.   (3.5%)   (4%)
Effect of income tax exemption on certain income   (8.2%)   (54%)
Change in valuation allowance   16.3%   79%
Effective tax rate  $-   $- 

 

The provision for income tax expense (benefit) for the periods ended December 31, 2025 and 2024 consisted of the following:

 

          
   2025   2024 
Income tax expense - current  $-   $- 
Income tax benefit -deferred   (641,840)   (517,978)
Increase in valuation allowance   641,840    517,978 
Total income tax expense  $-   $- 

 

The Company’s net deferred tax assets as of December 31, 2025 and 2024 is as follows:

 

          
   2025   2024 
Deferred tax asset          
Net operating loss  $(3,419,792)  $(3,049,122)
Less: valuation allowance   3,419,792    3,049,122 
Net deferred tax asset  $-   $-