NOTE 10 – 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, 2016 and 2015 of $987,512 and $1,220,708, 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 $307,735 and $556,733 for the three months ended September 30, 2016 and 2015, respectively.

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.

Income Taxes and Related Payables

Taxes payable consisted of the following:

	September 30,			June 30,
	2016			2016
VAT provision	$	(138,599	)	$	2,218
Income tax payable		(304,665	)		3,445,480
Other levies		667,095			656,520
Total	$	223,831		$	4,104,218

The provision for income taxes consists of the following:

	September 30, 2016		June 30, 2016
Current tax - foreign	$	1,295,248	$	7,371,967
Deferred tax		-		-
	$	1,295,248	$	7,371,967

Tax Rate Reconciliation

Our effective tax rates were approximately 15.0% and 19.7% for three months ended September 30, 2016 and 2015, 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, 2016 and 2015 for the following reasons:

September 30, 2016

	China					United States
	15% - 25%					34%					Total

Pretax income (loss)	$	8,965,900					(346,122	)			$	8,619,778

Expected income tax expense (benefit)		2,241,475		25.0	%		(117,682	)	34.0	%		2,123,794
High-tech income benefits on Jinong		(593,485	)	(6.6	)%		-		-			(593,485	)
Losses from subsidiaries in which no benefit is recognized		(352,742	)	(3.9	)%		-		-			(352,742	)
Change in valuation allowance on deferred tax asset from US tax benefit		-					117,682		(34.0	)%		117,681
Actual tax expense	$	1,295,248		14.4	%	$	-		-	%	$	1,295,248		15.0	%

September 30, 2015
	China					United States
	15% - 25%					34%					Total

Pretax income (loss)	$	10,616,945					(1,593,831	)			$	9,023,114

Expected income tax expense (benefit)		2,654,236		25.0	%		(541,903	)	34.0	%		2,112,333
High-tech income benefits on Jinong		(787,682	)	(7.4	)%		-		-			(787,682	)
Losses from subsidiaries in which no benefit is recognized		(89,112	)	(0.8	)%		-		-			(89,112	)
Change in valuation allowance on deferred tax asset from US tax benefit		-					541,903		(34.0	)%		541,903
Actual tax expense	$	1,777,442		16.7	%	$	-		-	%	$	1,777,442		19.7	%