Taxes Payable

12 Months Ended

Jun. 30, 2018

Taxes Payable [Abstract]

TAXES PAYABLE

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, because of the expiration of its tax exemption on December 31, 2007. Accordingly, it made provision for income taxes for the years ended June 30, 2018 and 2017 of $3,501,354 and $3,521,978, 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 $2,471,593 and $2,148,326 for the year ended June 30, 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:

	June 30,			June 30,
	2018			2017
VAT provision	$	(449,140	)	$	(575,872	)
Income tax payable		554,065			2,229,735
Other levies		836,747			1,036,544
Total	$	941,672		$	2,690,407

The provision for income taxes consists of the following:

	Years Ended June 30,
	2018		2017
Current tax – foreign	$	6,841,592	$	6,511,880
Repatriation Tax		29,010,535
Deferred tax		-		-
	$	35,852,127	$	6,511,880

The components of deferred income tax assets and liabilities are as follows:

	June 30,			June 30,
	2018			2017
Deferred tax assets:
Net operating loss	$	14,997,710		$	14,607,802
Total deferred tax assets		14,997,710			14,607,802
Less valuation allowance		(14,997,710	)		(14,607,802	)
	$	-		$	-

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.

At June 30, 2018, based on the weight of available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company determined that it was more likely than not that its deferred tax assets would not be realized and have a $15.0 million valuation allowance associated with its deferred tax assets.

U.S. Tax Cuts and Jobs Act and Provisional Estimates

On December 22, 2017, the TCJA was enacted into law, which significantly changes existing U.S. tax law and includes numerous provisions that affect our business, such as imposing a one-time transition tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial tax system. The TCJA required us to incur a one-time transition tax on deferred foreign income not previously subject to U.S. income tax at a rate of 15.5% for foreign cash and certain other net current assets, and 8% on the remaining income. The TCJA also reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. For fiscal year 2018, our blended U.S. federal statutory tax rate is 27.5%. This is the result of using the tax rate of 34% for the first and second quarter of fiscal year 2018 and the reduced tax rate of 21% for the third and fourth quarter of fiscal year 2018.

The TCJA was effective in the second quarter of fiscal year 2018. As of June 30, 2018, we have not completed our accounting for the estimated tax effects of the TCJA. During fiscal year 2018, we recorded a provisional net charge of $29.0 million related to the TCJA based on reasonable estimates for those tax effects. Due to the timing of the enactment and the complexity in applying the provisions of the TCJA, the provisional net charge is subject to revisions as we continue to complete our analysis of the TCJA, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service (“IRS”), Financial Accounting Standards Board, and other standard-setting and regulatory bodies. Adjustments may materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. Our accounting for the estimated tax effects of the TCJA will be completed during the measurement period, which is not expected to extend beyond one year from the enactment date.

During fiscal year 2018, we recorded an estimated net charge of $29.0 million related to the TCJA, due to the impact of the one-time transition tax on the deemed repatriation of deferred foreign income of $292.5 million.

Tax Rate Reconciliation

Our effective tax rates were approximately 124.0% and 20.6% for years ended June 30, 2018 and 2017, respectively, with the effect of repatriation tax. Substantially all 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 years ended June 30, 2018 and 2017 for the following reasons:

June 30, 2018
	China					United States
	15% - 25%					27.5%					Total
Pretax income (loss)	$	30,338,751					(1,417,849	)			$	28,920,902
Expected income tax expense (benefit)		7,584,688		25.0	%		(389,908	)	27.5	%		7,194,779
High-tech income benefits on Jinong		(3,501,354	)	(12.0	)%		-		-			(3,501,354	)
Losses from subsidiaries in which no benefit is recognized		2,758,258		9	%		-		-			2,758,258
Change in valuation allowance on deferred tax asset from US tax benefit		-					389,908		(27.5	)%		389,908
Repatriation Tax		0					29,010,535					29,010,535
Actual tax expense	$	6,841,592		22.6	%	$	29,010,535			%	$	35,852,127		124.0	%

June 30, 2017

Tax Rate Reconciliation
	China					United States
	15% - 25%					34%					Total
Pretax income (loss)	$	34,028,617				$	(2,364,584	)			$	31,664,033
Expected income tax expense (benefit)		8,507,154		25	%		(803,958	)	34	%		7,703,196
High-tech income benefits on Jinong		(2,033,489	)	-6.0	%							(2,033,489	)
Gains from subsidiaries in which additional benefit is recognized		38,215		0.1	%							38,215
Change in valuation allowance on deferred tax asset from US tax benefit		0					803,958		(34	)%		803,958
Actual tax expense	$	6,511,880		19.1	%	$	0		0	%	$	6,511,880		20.6	%