Taxes Payable

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

TAXES PAYABLE

NOTE 12 – 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, 2020 and 2019 of $2,344,928 and $6,497,340, respectively, which is mainly due to the operating income from VIEs. VIEs is subject to 25% EIT rate and thus it made provision for income taxes of $892,719 and $3,482,862 for the years ended June 30, 2020 and 2019, respectively.

Value-Added Tax

All 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.

On April 28, 2017, the PRC State of Administration of Taxation (SAT) released Notice 2017 #37, “Notice on Policy of Reduced Value Added Tax Rate,” under which, effective July 1, 2017, all of the Company’s fertilizer products that are produced and sold in the PRC are subject to a Chinese Value-Added Tax (VAT) of 11% of the gross sales price. The tax rate was reduced 2% from 13%.

On April 4, 2018, the PRC State of Administration of Taxation (SAT) released Notice 2018 #32, “Notice on Adjustment of VAT Tax Rate,” under which, effective May 1, 2018, all of the Company’s fertilizer products that are produced and sold in the PRC are subject to a Chinese Value-Added Tax (VAT) of 10% of the gross sales price. The tax rate was reduced 1% from 11%. 

On March 20, 2019, the PRC State of Administration of Taxation (SAT) released Notice 2019 #39, “Announcement on Policies Concerning Deepening the Reform of Value Added Tax,” under which, Effective April 1, 2019, all of the Company’s fertilizer products that are produced and sold in the PRC are subject to a Chinese Value-Added Tax (VAT) of 9% of the gross sales price. The tax rate was reduced 1% from 10%.

Income Taxes and Related Payables

Taxes payable consisted of the following:

	June 30,			June 30,
	2020			2019
VAT provision	$	(257,068	)	$	(424,535	)
Income tax payable		1,704,543			1,550,830
Other levies		1,187,442			1,220,859
Repatriation tax		29,010,535			29,010,535
Total	$	31,645,452		$	31,357,690

The provision for income taxes consists of the following:

	Years Ended June 30,
	2020		2019
Current tax – foreign	$	2,344,928	$	6,497,340
Total	$	2,344,928	$	6,497,340

Significant components of deferred tax assets were as follows:

	June 30,			June 30,
	2020			2019
Deferred tax assets
Deferred Tax Benefit		33,743,546			15,377,180
Valuation allowance		(33,743,546	)		(15,377,180	)
Total deferred tax assets	$	-			-

The change in valuation allowance for the year ended June 30, 2020 was an increase of $18,366,366 which was resulted from an increase in the net operating losses generated in USA.

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.

As of June 30, 2020, 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 the total deferred tax assets is 0.

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. For fiscal year 2019 and 2020, our U.S. federal statutory tax rate is 21%.

Tax Rate Reconciliation

Our effective tax rates were approximately -1.7% and 35.9% for years ended June 30, 2020 and 2019, respectively. 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 operations and comprehensive income differ from the amounts computed by applying the US statutory income tax rate of 21.0% and 21.0% to income before income taxes for the years ended June 30, 2020 and 2019 for the following reasons:

June 30, 2020
	China					United States
	15% - 25%					21%					Total
Pretax income (loss)	$	(132,851,959	)				(1,555,249	)			$	(134,407,208	)
Expected income tax expense (benefit)		(33,212,990	)	25.0	%		(326,602	)	21.0	%		(33,539,592	)
High-tech income benefits on Jinong		1,814,372		-1.4	%		-		-			1,814,372
Losses from subsidiaries in which no benefit is recognized		33,743,546		-25.4	%		-		-			33,743,546
Change in valuation allowance on deferred tax asset from US tax benefit		-					326,602		(21.0	)%		326,602
Actual tax expense	$	2,344,928		-1.8	%	$	-			%	$	2,344,928		-1.7	%

June 30, 2019
	China					United States
	15% - 25%					21%					Total
Pretax income (loss)	$	19,894,737					(1,807,002	)			$	18,087,735
Expected income tax expense (benefit)		4,973,684		25.0	%		(379,470	)	21.0	%		4,594,214
High-tech income benefits on Jinong		(697,062	)	(3.5	)%		-		-			(697,062	)
Losses from subsidiaries in which no benefit is recognized		2,220,717		11.2	%		-		-			2,220,717
Change in valuation allowance on deferred tax asset from US tax benefit		-					379,470		(21.0	)%		379,470
Actual tax expense	$	6,497,340		32.7	%	$	-			%	$	6,497,340		35.9	%