Note 8 — Taxes

Cayman Island and British Virgin Islands

The Group, Melkweg Cayman and Melkweg BVI were incorporated in the Cayman Islands and British Virgin Islands respectively and conduct all of the Group’s businesses through subsidiaries in Hong Kong, Macau, PRC and Taiwan. Under the current laws of the Cayman Islands and British Virgin Islands, the Group, Melkweg Cayman and Melkweg BVI are not subject to tax on income or capital gains.   In addition, upon payments of dividends by Melkweg BVI to Melkweg Cayman and Melkweg Cayman to the Group’s shareholders, no Cayman Island and British Virgin Islands withholding tax will be imposed.

Hong Kong

Two-tier Profits Tax Rates

Galaxy Payroll (HK), Galaxy Solutions Partner, Galaxy Payroll (China) and Galaxy Payroll (TW) were incorporated in Hong Kong and are subject to Hong Kong profits tax compliance.

The two-tier profits tax rates system was introduced under the Inland Revenue (Amendment)(No.3) Ordinance 2018 (“the Ordinance”) of Hong Kong became effective for the assessment year 2018/2019. Under the two-tier profit tax rates regime, the profits tax rate for the first HKD 2 million of assessable profits of a corporation will be subject to the lowered tax rate, 8.25%, while the remaining assessable profits will be subject to the legacy tax rate, 16.5%. The Ordinance only allows one entity within a group of “connected entities” is eligible for the two-tier tax rate benefit. An entity is a connected entity of another entity if (1) one of them has control over the other; (2) both of them are under the control (more than 50% of the issued share capital) of the same entity; (3) in the case of the first entity being a natural person carrying on a sole proprietorship business-the other entity is the same person carrying on another sole proprietorship business. Under the Ordinance, it is an entity’s election to nominate an entity that will be subject to the two-tier profits tax rate on its Profits Tax Return. The election is irrevocable. The two-tier profits tax regime is an ongoing statutory tax policy in Hong Kong with no statutory expiration date or sunset clause as of June 30, 2026, 2025 and 2024. The election to apply the two-tier rates is made annually on an entity-by-entity basis and is irrevocable for the relevant year of assessment.

Galaxy Payroll (HK) applies the two-tier profits tax rate for its provision for current income and deferred taxes.

Net operating loss will be carried forward indefinitely under Hong Kong profits tax regulation.

Macau

Galaxy HR (Macau) applies the exemption amount for the supplementary income tax income is set at MOP 600,000 for its tax years of 2025 and 2024.

Corporate Income Tax in Galaxy HR (Macau) is subject to a 12% tax rate during the years ended June 30, 2026, 2025 and 2024.

No provision for taxation in Macau has been made as the Group’s entities in Macau had no assessable profit.

The People’s Republic of China (“PRC”)

Under the Law of The People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of Galaxy HR (SZ) is 25% during the years ended June 30, 2026, 2025 and 2024.

No provision for taxation in PRC has been made as the Group’s entities in PRC had no assessable profit.

Taiwan

Corporate Income Tax in Galaxy HR (TW) is subject to a 20% tax rate during the years ended June 30, 2026, 2025 and 2024.

The Income/(Loss) before Income Taxes consisted of the following components: 

The income tax provision consisted of the following components:

The following table sets forth the significant components of the aggregate deferred tax assets as of:

The net decrease of valuation allowance during the year ended June 30, 2026 was HKD230,217 (US$29,357). This movement mainly reflected an increase in valuation allowance of HKD196,493 (US$25,056), forfeiture of the net operating loss of HKD450,088 (US$57,394) and foreign exchange difference of HKD23,378 (US$2,981).

A reconciliation between the Group’s actual provision for income taxes and the provision at the Hong Kong statutory rate was as follows:

For the years ended June 30, 2026, 2025 and 2024, the Group has unutilized tax losses, incurred from the PRC entities, of HKD535,234 (US$68,252), HKD1,190,327 and HKD1,679,389, respectively. As of June 30, 2026, the tax loss carry-forwards will expire between the year 2027 through 2031. The unutilized tax losses of HKD535,234 (US$68,252) as of June 30, 2026 will expire as follows: HKD229,483 (US$29,263) in 2027, HKD55,432 (US$7,069) in 2028, HKD10,855 (US$1,384) in 2029, HKD239,464 (US$30,536) in 2030 and nil in 2031. The management believes that it is more likely than not that the Group will not realize these potential tax benefits as these operations will not generate any operating profits in the foreseeable future. As a result, a valuation allowance was provided against the full amount of potential tax benefits based on the unutilized tax losses incurred.

The Group evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2026 and 2025, the Group has an uncertain tax position in respect of the tax treatment of certain income recognized in prior years. Because the position does not meet the more-likely-than-not recognition threshold, no tax benefit has been recognized; the resulting unrecognized tax benefit of HKD2.3 million, which, if recognized, would affect the effective tax rate, is provided for as a liability and is included within income tax payable as of June 30, 2026 and 2025. No penalties or interest have been recognized in either the consolidated statements of income/(loss) or the consolidated balance sheets. For the years ended June 30, 2026, 2025 and 2024, the Group did not incur any interest and penalties related to potential underpaid income tax expenses. The Group’s major tax jurisdiction is Hong Kong. Under relevant Hong Kong tax laws, tax case is normally subject to investigation by the tax authority for up to 6 years of assessment prior to the current year of assessment, if in a case of fraud or willful evasion, then the investigation can be extended to cover 10 years of assessment.