v3.26.3
Taxes
 12 Months Ended
Jun. 30, 2026
Taxes [Abstract]  
TAXES

NOTE 13 – TAXES

 

(a) Corporate Income Taxes

 

Cayman Islands and BVI

 

Under the current laws of the Cayman Islands and BVI, the Company and subsidiaries in BVI are not subject to tax on income or capital gains.

 

Hong Kong

 

Subsidiaries in Hong Kong are subject to Hong Kong profits tax rate at a rate of 16.5%, and foreign-derived income is exempted from income tax.

 

Singapore

 

Subsidiaries in Singapore are subject to Singapore corporate income tax at a rate of 17.0%, and foreign-derived income is exempted from income tax.

 

Mainland China

 

Under the Enterprise Income Tax (“EIT”) Law of mainland China, enterprises are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and tax exemption may be granted if qualified. EIT Law grants a preferential tax rate to High and New Technology Enterprises (“HNTEs”). An enterprise qualified as HNTE and awarded with the “HNTE” certificate may enjoy a reduced EIT rate of 15%. CLPS Shanghai, the Company’s main operating subsidiary in mainland China, was recognized as qualified HNTEs since 2013. Its latest qualified periods are for 2025 to 2027 and it enjoys a preferential tax rate of 15%. JAJI (Shanghai), one of the Company’s operating subsidiaries in mainland China, was also recognized as qualified HNTEs since 2022. Its latest qualified periods are for 2025 to 2027 and it enjoys a preferential tax rate of 15%.

 

A qualified enterprise in encouraged industries registered in the Hainan Free Trade Port and engaged in substantive operations may enjoy a reduced EIT rate of 15%. CLPS Hainan, a Company’s subsidiary in mainland China, was recognized as a qualified enterprise engaged in encouraged industries registered in the Hainan Free Trade Port and engaged in substantive operations. It enjoys the reduced EIT rate of 15%. 

 

(Loss) income before income taxes and share of (loss) income in equity investees

 

    For the year ended June 30  
    2026     2025     2024  
Mainland China     (7,367,640 )     516,640       2,878,314  
Non-mainland China     (4,787,559 )     (5,592,254 )     (4,721,679 )
      (12,155,199 )     (5,075,614 )     (1,843,365 )

 

The following table reconciles the statutory rate to the Company’s effective tax rate:

 

    For the year ended June 30  
    2025     2024  
Mainland China statutory income tax rate     25.0 %     25.0 %
Effect of income tax rate difference in other jurisdictions     (22.0 )%     (56.5 )%
Effect of tax rate changes on deferred taxes     5.3 %     (8.9 )%
Effect of mainland China preferential tax rate and tax relief     (1.7 )%     (27.0 )%
Tax exempt income     1.4 %     1.6 %
Research and development credits     28.2 %     96.6 %
Business insurance     (2.5 )%     (5.7 )%
Late payment interest     (5.0 )%     (20.0 )%
Withholding tax     - %     (4.7 )%
Depreciation and amortization     - %     (2.2 )%
Investment gain/loss     - %     (2.3 )%
Statutory income/expense     (0.5 )%     3.9 %
Intercompany transfers     (14.6 )%     (10.9 )%
Change in valuation allowances     (30.0 )%     3.6 %
Goodwill impairment     (1.3 )%     - %
Others     (0.9 )%     (1.2 )%
Effective tax rate     (18.6 )%     (8.7 )%

 

 

The following table reconciles the statutory rate to the Company’s effective tax rate: (continued)

 

    As of June 30,2026  
    USD     Percent  
Mainland China statutory income tax rate     (3,038,800 )     25.0 %
Cross border     -       - %
Change in valuation allowances     2,125,638       (17.5 )%
Nontaxable or nondeductible items     172,726       (1.4 )%
Changes in unrecognized tax benefits     (577,077 )     4.7 %
Foreign tax effects                
Singapore                
Goodwill impairment     244,083       (2.0 )%
Others     93,246       (0.8 )%
Hong Kong     162,256       (1.3 )%
BVI                
Statutory tax rate difference between BVI and China     214,915       (1.8 )%
Cayman                
Statutory tax rate difference between Cayman and China     743,375       (6.1 )%
Other foreign jurisdictions     (40,318 )     0.3 %
Other adjustments                
Research and development credits     (1,530,153 )     12.6 %
Statutory income/expense     577,077       (4.7 )%
Effect of tax rate changes on deferred taxes     (1,222,004 )     10.1 %
Effect of mainland China preferential tax rate and tax relief     1,238,972       (10.2 )%
Intercompany transfers     739,833       (6.1 )%
Late payment interest     329,931       (2.7 )%
Others     (16,761 )     0.1 %
Income tax expenses     216,939       (1.8 )%

 

The provision (benefit) for income tax consists of the following:

 

    For the year ended June 30  
    2026     2025     2024  
Current income tax     244,336       463,191       878,404  
Deferred income tax     (27,397 )     484,338       (717,679 )
Total provision for income tax expenses     216,939       947,529       160,725  

 

As of June 30, 2026, the Company had net operating loss carry forwards of approximately $13,750,826, from the Company’s subsidiaries of mainland China, which will expire between 2026 and 2036 if not utilized.

 

As of June 30, 2026, the Company had net operating loss carry forwards of approximately $3,001,315 and $2,422,776 from its operations in Singapore and Hong Kong, respectively. The net operating losses in Singapore and Hong Kong will be carried forward indefinitely.

 

The significant components of the deferred tax assets and liabilities are as follows:

 

    As of June 30,  
    2026     2025  
Deferred tax assets:            
Net operating loss carry forwards     3,822,774       2,188,458  
Accrued expenses     13,110       36,094  
Lease liabilities     531,036       840,258  
Share of investee’s loss     27,963       33,764  
Unrealized gains and losses for internal related parties     119,999       145,804  
Provision for credit losses     665,151       168,227  
Impairment of deferred contract costs     277,286       -  
Others     38,801       7,259  
Valuation allowances     (4,856,865 )     (2,495,112 )
Total deferred tax assets     639,255       924,752  
                 
Deferred tax liabilities:                
ROU assets     493,954       758,483  
Intangible assets     290,210       344,139  
Total deferred tax liabilities     784,164       1,102,622  
                 
Net deferred tax assets     59,691       73,942  
Net deferred tax liabilities     204,600       251,812  

 

As of June 30, 2026 and 2025, valuation allowances were provided against deferred tax assets in entities which were in a three-year cumulative losses position and/or are not forecasted to turn profits in the foreseeable future. 

 

For the years ended June 30, 2026, 2025 and 2024, the Company accrued dividend distribution withholding tax for the remittance of earnings from subsidiaries in mainland China to offshore entities of nil, nil, and $147,982, respectively. As of June 30, 2026 and 2025, the Company intended to permanently reinvest the remaining undistributed earnings from subsidiaries of mainland China to fund future operations and thus nil and nil deferred tax has been recognized for withholding taxes that would be payable on the unremitted earnings that are subject to withholding taxes of the Company’s subsidiaries established in mainland China.

 

Uncertain tax positions

 

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. Unrecognized tax benefits were presented in “other non-current liabilities” in the consolidated balance sheets. As of June 30, 2026, 2025　and 2024, the Company had unrecognized tax benefits of $4,604,263, $3,880,945, and $2,780,674, respectively, of which $2,562,138, $2,685,639 and $2,649,114 are presented on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balance sheet. As of June 30, 2026, 2025 and 2024, $2,594,061, $2,685,639 and $2,759,465 of the uncertain tax positions, if ultimately recognized, would affect the effective tax rate. The Company recorded interests of $353,561 and zero penalties related to potential underpaid income tax expenses for the year ended June 30, 2026, interests of $264,789 and zero penalties related to potential underpaid income tax expenses for the year ended June 30, 2025, and $368,123 interests and zero penalties related to potential underpaid income tax expenses for the year ended June 30, 2024, respectively.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefit was as follows:

 

    2026     2025     2024  
Balance at July 1     3,880,945       2,780,674       2,442,085  
Increase     1,215,792       1,072,205       518,179  
Decrease     (708,484 )     (15,103 )     (172,682 )
Foreign currency translation adjustment     216,010       43,169       (6,908 )
Balance at June 30     4,604,263       3,880,945       2,780,674  

 

As of June 30, 2026, the open tax years for mainland China ranges from calendar year 2021 to calendar year 2026.

 

(b) Tax Payables

 

The Company’s tax payables consist of the following:

 

    As of June 30,  
    2026     2025  
             
VAT payable     1,277,802       908,992  
Corporate income tax payable     372,261       113,840  
Withholding tax payable     454,699       390,640  
Disability insurance fund payable     759,004       971,516  
Other tax payables     97,426       78,718  
Total tax payables     2,961,192       2,463,706