NOTE 11 – TAXES PAYABLE

Enterprise Income Tax

Effective January 1, 2008, the Enterprise Income Tax (“EIT”) law of the PRC replaced the tax laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”). The EIT rate of 25% replaced the 33% rate that was applicable to both DEs and FIEs. The two year tax exemption and three year 50% tax reduction tax holiday for production-oriented FIEs was eliminated. Since January 1, 2008, Jinong became subject to income tax in China at a rate of 15% as a high-tech company, as a result of the expiration of its tax exemption on December 31, 2007. Accordingly, it made provision for income taxes for the three months ended September 30, 2013, and 2012 of $1,825,650 and $1,754,200, respectively, which is mainly due to the operating income from Jinong. Gufeng is subject to 25% EIT rate and thus it made provision for income taxes of $835,700 and $95,784 for the three months ended September 30, 2013 and 2012.

Value-Added Tax

All of the Company’s fertilizer products that are produced and sold in the PRC were subject to a Chinese Value-Added Tax (VAT) of 13% of the gross sales price. On April 29, 2008, the PRC State of Administration of Taxation (SAT) released Notice #56, “Exemption of VAT for Organic Fertilizer Products”, which allows certain fertilizer products to be exempt from VAT beginning June 1, 2008. The Company submitted the application for exemption in May 2009, which was granted effective September 1, 2009, continuing through December 31, 2015. The VAT exemption applies to all agricultural products sold by Jintai, and all but a nominal amount of agricultural products sold by Jinong.

Income Taxes and Related Payables

Taxes payable consist of the following:

	September 30,		June 30,
	2013		2013
VAT provision	$	42,803	$	36,573
Income tax payable		23,521,402		25,348,794
Other levies		359,313		343,392
Total	$	23,923,518	$	25,728,759

Tax Rate Reconciliation

Our effective tax rates were approximately 20.4% and 17.3% for the three months ended September 30, 2013 and 2012, respectively. Substantially all of the Company’s income before income taxes and related tax expense are from PRC sources. Actual income tax benefit reported in the consolidated statements of income and comprehensive income differ from the amounts computed by applying the US statutory income tax rate of 34% to income before income taxes for the three months ended September 30, 2013 and 2012 for the following reasons:

September 30, 2013
	China				United States
	15% - 25%				34%				Total

Pretax income (loss)	$	15,349,063			$	(2,309,256)			$	13,039,807
Expected income tax expense (benefit)		3,837,266	25.0	%		(785,147)	34.0	%		3,052,119
High-tech income benefits on Jinong		(696,553)	(4.5)	%		-	-			(696,553)
Losses from subsidiaries in which no benefit is recognized		(479,363)	(3.1)	%		-	-			(479,363)
Change in valuation allowance on deferred tax asset from US tax benefit		-				785,147	(34.0)	%		785,147
Actual tax expense	$	2,661,350	17.3	%	$	-	-	%	$	2,661,350	20.4	%

September 30, 2012
	China				United States
	15% - 25%				34%				Total

Pretax income (loss)	$	12,050,347			$	(1,338,963)			$	10,711,384
Expected income tax expense (benefit)		3,012,587	25.0	%		(455,247)	34.0	%		2,557,340
High-tech income benefits on Jinong		(1,168,747)	(9.7)	%		-	-			(1,168,747)
Losses from subsidiaries in which no benefit is recognized		6,144	0.1	%		-	-			6,144
Change in valuation allowance on deferred tax asset from US tax benefit		-				455,247	(34.0)	%		455,247.42
Actual tax expense	$	1,849,984	15.4	%	$	-	-	%	$	1,849,984	17.3	%