| Income Taxes |
Note
16 – Income
Taxes
Cayman
Islands
Cayman
Islands entities are not subject to income taxes on profits, income, gains or appreciation, and there is no taxation in the nature of
inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman
Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction
of the Cayman Islands. The Cayman Islands is a party to a double tax treaty entered with the United Kingdom in 2010, but is not otherwise
party to any double tax treaties that are applicable to any payments made to or by our Company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments
of dividends and capital in respect of the Company’s ordinary shares will not be subject to taxation in the Cayman Islands and
no withholding will be required on the payment of a dividend or capital to any holder of the Company’s ordinary shares, as the
case may be, nor will gains derived from the disposal of the Company’s ordinary shares be subject to Cayman Islands income or corporation
tax.
Malaysia
Malaysia
Income Tax is calculated at 24% of the estimated assessable profits for the relevant year. Net operating losses can be carried forward
for up to ten consecutive years of assessment starting from the year subsequent to the year in which the loss was incurred.
For
Labuan trading activities, chargeable profits are subject to tax under the Labuan Business Activity Tax Act 1990 (“LBATA”)
at 3% of audited net profits.
Singapore
Singapore
Income Tax is calculated at 17% of chargeable income for the relevant year. Net operating losses can be carried forward indefinitely
to offset against future taxable income.
The
total income tax (benefit) expense included in the consolidated statements of operations and comprehensive (loss) income as determined
in accordance with ASC 740 by jurisdiction is as follows:
Schedule
of taxable income/(loss) before income taxes by jurisdiction
| | |
June 30, 2026 | | |
June 30, 2025 | | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
For the Year Ended | | |
For the Six Months Ended | | |
For the Years Ended | |
| | |
June 30, 2026 | | |
June 30, 2025 | | |
December 31,
2024 | | |
December 31,
2023 | |
| Labuan | |
$ | 9,740 | | |
$ | 1,022 | | |
$ | 26,190 | | |
$ | 25,263 | |
| Malaysia | |
| (370,793 | ) | |
| (1,039,138 | ) | |
| 1,280,329 | | |
| 684,759 | |
| Singapore | |
| 43,036 | | |
| 50,082 | | |
| 121,780 | | |
| 64,217 | |
| Total income tax (benefit) expense | |
$ | (318,017 | ) | |
$ | (988,034 | ) | |
$ | 1,428,299 | | |
$ | 774,239 | |
Reconciliation
of the statutory income tax rate and the Company’s effective income tax rate is as follows:
Schedule
of reconciliations of the statutory income tax rate and effective income tax rate
| | |
June 30, 2026 | | |
June 30, 2025 | | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
For the Year Ended | | |
For the Six Months Ended | | |
For the Years Ended | |
| | |
June 30, 2026 | | |
June 30, 2025 | | |
December 31,
2024 | | |
December 31,
2023 | |
| Income tax expense at Labuan statutory rate | |
$ | - | | |
$ | 8,411 | | |
$ | 26,247 | | |
$ | 25,375 | |
| Income tax expense at Malaysia statutory rate | |
| (3,261,415 | ) | |
| 283,787 | | |
| 613,388 | | |
| 710,438 | |
| Income tax expense at Singapore statutory rate | |
| 102,391 | | |
| 69,507 | | |
| 110,461 | | |
| 91,240 | |
| Increases (decreases) due to: | |
| | | |
| | | |
| | | |
| | |
| Other adjustments(1) | |
| 1,032,309 | | |
| (303,211 | ) | |
| 743,918 | | |
| (177,593 | ) |
| Other deferred tax adjustments(2) | |
| 2,325,424 | | |
| (45,490 | ) | |
| (9,092 | ) | |
| 13,072 | |
| Other exemption, rebate and credit | |
| (27,142 | ) | |
| - | | |
| (26,038 | ) | |
| (56,397 | ) |
| (Over) Under provision in prior years(3) | |
| (489,584 | ) | |
| (1,001,038 | ) | |
| (30,585 | ) | |
| 168,104 | |
| Income tax expense (benefit), net | |
$ | (318,017 | ) | |
$ | (988,034 | ) | |
$ | 1,428,299 | | |
$ | 774,239 | |
| (1) | Other
adjustments mainly represent income not subject to tax and expenses not deductible for tax
purposes. The nontaxable or nondeductible items primarily comprise adjustments relating to
chartering fees paid to companies incorporated in Labuan, professional fees, expected credit
loss and foreign exchange differences incurred by Tumpuan Megah. Chartering fees paid to
Labuan companies and certain professional fees are subject to statutory limitations or restrictions
on tax deductibility, and the portion not deductible for income tax purposes is included
in the reconciliation as a nondeductible item. Expected credit loss and foreign exchange
differences include amounts that are not subject to tax or deductible for income tax purposes,
as applicable. |
| (2) | For
the year ended June 30, 2026, it primarily represented the effects of unutilized tax losses
and unabsorbed capital allowances arising during the year, for which deferred tax assets
were fully offset by a valuation allowance, as it is not more likely than not that the related
tax benefits will be realized. |
| (3) | With
the change of accounting year end from December 31 to June 30, the reporting period of Tumpuan
Megah covered 18 months from January 1, 2024 to June 30, 2025. As Tumpuan Megah incurred
a net loss for the six months ended June 30, 2025, the tax loss incurred during the six-month
period reduced the overall assessable profits for the full 18-month reporting period. As
a result, the income tax provision previously recognized for the year ended December 31,
2024 was overstated by $1,001,038 and was adjusted during the six months ended June 30, 2025. |
Schedule
of reconciliations of the statutory income tax rate percentage and effective income tax rate percentage
| | |
June 30, 2026 | | |
June 30, 2025 | | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
For the Year Ended | | |
For the Six Months Ended | | |
For the Years Ended | |
| | |
June 30, 2026 | | |
June 30, 2025 | | |
December 31,
2024 | | |
December 31,
2023 | |
| Income tax expense at Labuan statutory rate | |
| - | | |
| (0.2 | )% | |
| 0.8 | % | |
| 0.7 | % |
| Income tax expense at Malaysia statutory rate | |
| 16.8 | % | |
| (5.2 | )% | |
| 17.6 | % | |
| 19.0 | % |
| Income tax expense at Singapore statutory rate | |
| (0.5 | )% | |
| (1.2 | )% | |
| 3.2 | % | |
| 2.4 | % |
| Increases (decreases) due to: | |
| | | |
| | | |
| | | |
| | |
| Other adjustments | |
| (5.3 | )% | |
| 5.5 | % | |
| 21.4 | % | |
| (4.8 | )% |
| Other deferred tax adjustments | |
| (12.0 | )% | |
| 0.8 | % | |
| (0.3 | )% | |
| 0.4 | % |
| Other exemption, rebate and credit | |
| 0.1 | % | |
| - | | |
| (0.7 | )% | |
| (1.5 | )% |
| (Over) Under provision in prior years | |
| 2.5 | % | |
| 18.2 | % | |
| (0.9 | )% | |
| 4.5 | % |
| Income tax expense (benefit), net | |
| 1.6 | % | |
| 17.9 | % | |
| 41.1 | % | |
| 20.7 | % |
Deferred
tax
The
Company recognizes deferred tax assets and liabilities for temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities, measured at the applicable tax rates.
Schedule
of deferred tax assets and liabilities
| | |
As of June 30, | |
| | |
2026 | | |
2025 | |
| Allowance for expected credit losses | |
$ | 319,380 | | |
$ | 376,883 | |
| Depreciation and amortization | |
| (8,554 | ) | |
| 13,832 | |
| Unrealized foreign currency transaction gains | |
| (336,021 | ) | |
| (323,498 | ) |
| Total deferred tax (liabilities) assets, net | |
$ | (25,195 | ) | |
$ | 67,217 | |
Movement
of the Company’s deferred tax (liabilities) assets, net, is as follows:
Schedule
of movement of company’s deferred tax assets and liabilities
| | |
As of June 30, | |
| | |
2026 | | |
2025 | |
| Balance at July 1, 2025 and January 1, 2025 | |
$ | 67,217 | | |
$ | - | |
| (Decrease) increase recognized in the income statement | |
| (94,517 | ) | |
| 64,914 | |
| Foreign exchange difference | |
| 2,105 | | |
| 2,303 | |
| Balance at June 30, 2026 and June 30, 2025 | |
$ | (25,195 | ) | |
$ | 67,217 | |
|