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 nine months ended March 31, 2014, and 2013 of $3,698,296 and $4,746,988, 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 $2,752,026 and $2,010,416 for the nine months ended March 31, 2014 and 2013.

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:

	March 31,		June 30,
	2014		2013
VAT provision	$	21,377	$	36,573
Income tax payable		9,290,397		25,348,794
Other levies		357,597		343,392
Total	$	9,669,371	$	25,728,759

Tax Rate Reconciliation

Our effective tax rates were approximately 23.3% and 18.1% for the nine months ended March 31, 2014 and 2013, 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 nine months ended March 31, 2014 and 2013 for the following reasons:

March 31, 2014
	China				United States
	15% - 25%				34%				Total

Pretax income (loss)	$	35,186,323			$	(7,472,676)			$	27,713,647

Expected income tax expense (benefit)		8,796,581	25.0	%		(2,540,710)	34.0	%		6,255,871
High-tech income benefits on Jinong		(2,305,732)	(6.6)	%		-	-			(2,305,732)
Losses from subsidiaries in which no benefit is recognized		(40,527)	(0.1)	%		-	-			(40,527)
Change in valuation allowance on deferred tax asset from US tax benefit		-				2,540,710	(34.0)	%		2,540,710
Actual tax expense	$	6,450,322	18.3	%	$	-	-	%	$	6,450,322	23.3	%

March 31, 2013	China				United States
	15% - 25%				34%				Total

Pretax income (loss)	$	40,324,031			$	(3,053,240)			$	37,270,791

Expected income tax expense (benefit)		10,081,008	25.0	%		(1,038,102)	34.0	%		9,042,906
High-tech income benefits on Jinong		(1,976,456)	(4.9)	%		-	-			(1,976,456)
Losses from subsidiaries in which no benefit is recognized		(1,347,148)	(3.3)	%		-	-			(1,347,148)
Change in valuation allowance on deferred tax asset from US tax benefit		-				1,038,102	(34.0)	%		1,038,102
Actual tax expense	$	6,757,404	16.8	%	$	-	-	%	$	6,757,404	18.1	%