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, 2018 and 2017 of $2,689,188 and $2,814,503, 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 $1,899,873 and $1,428,284 for the nine months ended March 31, 2018 and 2017, 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. On August 10, 2015 and August 28, 2015, the SAT released Notice #90. “Reinstatement of VAT for Fertilizer Products”, and Notice #97, “Supplementary Reinstatement of VAT for Fertilizer Products”, which restore the VAT of 13% of the gross sales price on certain fertilizer products includes non-organic fertilizer products starting from September 1, 2015, but granted taxpayers a reduced rate of 3% from September 1, 2015 through June 30, 2016.

Income Taxes and Related Payables

Taxes payable consisted of the following:

	March 31,			June 30,
	2018			2017
VAT provision	$	(539,917	)	$	(575,872	)
Income tax payable		3,962,830			2,229,735
Other levies		806,262			1,036,544
Total	$	4,229,175		$	2,690,407

The provision for income taxes consists of the following:

	March 31, 2017		June 30, 2016
Current tax - foreign	$	5,066,780	$	7,371,967
Deferred tax		-		-
	$	5,066,780	$	7,371,967

Tax Rate Reconciliation

Our effective tax rates were approximately 19.8% and 20.1% for the nine months ended March 31, 2018 and 2017, 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, 2018 and 2017 for the following reasons:

March 31, 2018
	China					United States
	15% - 25%					34%						Total

Pretax income (loss)	$	26,650,476		-			(1,035,728	)		-		$	25,614,748

Expected income tax expense (benefit)		6,662,619		25.0	%		(352,147	)		34.0	%		6,310,472
High-tech income benefits on Jinong		(2,689,188	)	(10	)%					-			(2,689,188	)
Losses from subsidiaries in which no benefit is recognized		(1,093,349	)	4	%					-			(1,093,349	)
Change in valuation allowance on deferred tax asset from US tax benefit		0		-			352,147		352,147	(34.0	)%		352,147
Actual tax expense	$	5,066,780		19	%	$	-			-	%	$	5,066,780		19.8	%

March 31, 2017

	China					United States
	15% - 25%					34%						Total

Pretax income (loss)	$	25,831,101		-			(2,067,988	)		-		$	23,763,113

Expected income tax expense (benefit)		6,457,775		25.0	%		(703,116	)		34.0	%		5,754,659
High-tech income benefits on Jinong		(1,653,707	)	(6	)%					-			(1,653,707	)
Losses from subsidiaries in which no benefit is recognized		(31,908	)	(0.1	)%					-			(31,908	)
Change in valuation allowance on deferred tax asset from US tax benefit		0		-			703,116		703,116	(34.0	)%		703,116
Actual tax expense	$	4,772,160		18	%	$	-			-	%	$	4,772,160		20.1	%