Note 8 - Income Taxes

9 Months Ended

Dec. 31, 2017

Notes

Note 8 - Income Taxes

NOTE 8 - INCOME TAXES

China YCT and Landway Nano were incorporated in the United States of America and are subject to United States federal taxation. No provisions for income taxes have been made, as there was no taxable income from U.S. operations for the three and nine months ended December 31, 2017 and 2016. The Company has a net loss carryforward of approximately $22,000 which will expire in 2047. The Company has established a 100% valuation allowance on deferred tax assets resulting from the net operation loss incurred in the U.S.

The Company's Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning privately run and foreign invested enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

The Company has not provided deferred taxes on undistributed earnings attributable to its PRC subsidiaries as they are to be permanently reinvested. On February 22, 2008, MOF, and SAT, jointly issued Cai Shui 2008 Circular 1, "Circular 1." According to Article 4 of Circular 1, distributions of accumulated profits earned by foreign investment enterprises, ("FIE") prior to January 1, 2008 to their foreign investors will be exempt from withholding tax, ("WHT") while distribution of the profits earned by a FIE after January 1, 2008 to its foreign investors shall be subject to WHT.

Dividend payments by PRC subsidiaries are limited by certain statutory regulations in the PRC. No dividends may be paid by PRC subsidiaries without first receiving prior approval from SAFE. Dividend payments are restricted to 90% of after tax profits.

Should the Company's PRC subsidiaries distribute all their profits generated after December 31, 2007, the aggregate withholding tax amount will be $9,188,426 and $8,306,160 as of December 31, 2017 and March 31, 2017, respectively.

Prior to the new Tax Cut and Jobs Act (the “New Law”), since Shandong Spring intends to reinvest its earnings to further expand its businesses in mainland China, it does not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, the Company has not recorded any deferred taxes in relation to US tax on the cumulative amount of undistributed retained earnings since January 1, 2008. Under the “#1703. Treatment of deferred foreign income upon transition to new participation exemption system-deemed repatriation” of the New Law, U.S. shareholders owning at least 10% of foreign subsidiary general must include in income, for the subsidiary’s last tax year beginning before 2018, the shareholder’s pro rata share of the accumulated post-’86 historical E&P of the foreign subsidiary as of the “measurement date” to the extent such E&P has not been previously subject to U.S. tax.  The measurement date” is November 2, 2017, or December 31, 2017, whichever date produces a greater result. The portion of the E&P comprising cash or cash equivalents is taxed at a reduced rate of 15.5%, while any remaining E&P is taxed at a reduced rate of 8%. At the election of the U.S. shareholder, the tax liability is payable over a period of up to eight years. The payments for each of the first five years equal 8% of the net tax liability. The amount of the sixth installment is 15% of the net tax liability, increasing to 20% for the seventh installment and the remaining balance of 25% in the eighth year. The Company is still estimating the tax liability as result of the New Law being effective on December 22, 2017.  If such liability is determined, the Company will make adjustments to its liabilities at the year ended March 31, 2018 in accordance with the provisions of ASC Topic 740, Income Taxes.

The reconciliation of income tax expense at the U.S. statutory rate of 35% to the Company's effective tax rate is as follows:

	Nine Months Ended
	December 31,
	2017		2016
U.S. Statutory rate	$	4,244,578	$	2,883,210
Tax rate difference between China and U.S.		(1,212,737)		(823,774)
Permanent difference		-		18,908
Effective tax rate	$	3,031,841	$	2,078,344

The provisions for income taxes are summarized as follows: 

	Nine Months Ended
	December 31,
	2017		2016
Current	$	2,763,366	$	2,089,237
Deferred		268,475		(10,893)
Total	$	3,031,841	$	2,078,344