Annual report pursuant to Section 13 and 15(d)

Taxation

v3.7.0.1
Taxation
12 Months Ended
Dec. 31, 2016
Taxation [Abstract]  
Income Tax Disclosure [Text Block]
12.
Taxation
 
Highpower and its direct and indirect wholly and majority owned subsidiaries file tax returns separately.
 
1) VAT
 
Pursuant to the Provisional Regulation of the PRC on VAT and the related implementing rules, all entities and individuals ("taxpayers") that are engaged in the sale of products in the PRC are generally required to pay VAT at a rate of 17% of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayers. Further, when exporting goods, the exporter is entitled to a portion of or all the refund of VAT that it has already paid or incurred. The Company’s PRC subsidiaries are subject to VAT at 17% of their revenues.
 
2) Income tax
 
United States
 
Highpower was incorporated in Delaware and is subject to U.S. federal income tax with a system of graduated tax rates ranging from 15% to 35%. No deferred U.S. taxes are recorded since all accumulated profits in the PRC will be permanently reinvested in the PRC.
 
Hong Kong
 
HKHTC, which was incorporated in Hong Kong, is subject to a corporate income tax rate of 16.5%.
 
PRC
 
In accordance with the relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable tax rate on taxable income.
 
In China, the companies granted with National High-tech Enterprise (“NHTE”) status enjoy 15% income tax rate. This status needs to be renewed every three years. If these subsidiaries fail to renew NHTE status, they will be subject to income tax at a rate of 25% after the expiration of NHTE status. All the PRC subsidiaries received NHTE status and enjoy 15% income tax rate for calendar year 2016 and 2015.
 
The components of the provision for income taxes expenses are:
 
 
 
For the years ended
 
 
 
December 31,
 
 
 
2016
 
2015
 
 
 
$
 
$
 
Current
 
 
1,471,933
 
 
809,629
 
Deferred
 
 
(32,756)
 
 
9,107
 
Total income tax expense
 
 
1,439,177
 
 
818,736
 
 
The reconciliation of income taxes expenses computed at the statutory tax rate applicable to the Company to income tax expenses is as follows:
 
 
 
For the years ended December 31,
 
 
 
2016
 
2015
 
 
 
$
 
$
 
Income before tax
 
 
7,066,954
 
 
4,279,006
 
 
 
 
 
 
 
 
 
Provision for income taxes at applicable income tax rate
 
 
1,866,878
 
 
988,833
 
Effect of preferential tax rate
 
 
(959,453)
 
 
60,060
 
R&D expenses eligible for super deduction
 
 
(546,088)
 
 
(546,156)
 
Non-deductible expenses
 
 
146,493
 
 
59,122
 
Change in valuation allowance
 
 
931,347
 
 
256,877
 
Effective enterprise income tax
 
 
1,439,177
 
 
818,736
 
 
3) Deferred tax assets
 
Deferred tax assets and deferred tax liabilities reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purpose and the tax bases used for income tax purpose. The following represents the tax effect of each major type of temporary difference.
 
 
 
December 31,
 
December 31,
 
 
 
2016
 
2015
 
 
 
$
 
$
 
 
 
 
 
 
 
Tax loss carry-forward
 
 
4,274,881
 
 
3,382,543
 
Allowance for doubtful receivables
 
 
121,932
 
 
47,197
 
Impairment for inventory
 
 
98,276
 
 
217,733
 
Difference for sales cut-off
 
 
14,245
 
 
33,071
 
Deferred income
 
 
114,224
 
 
131,992
 
Property, plant and equipment subsidized by government grant
 
 
468,313
 
 
490,883
 
Impairment for property, plant and equipment
 
 
76,248
 
 
-
 
Total gross deferred tax assets
 
 
5,168,119
 
 
4,303,419
 
Valuation allowance
 
 
(3,690,358)
 
 
(2,759,105)
 
Total net deferred tax assets
 
 
1,477,761
 
 
1,544,314
 
 
The following represents the amounts and expiration dates of operating loss carried forwards for tax purpose:
 
 
 
$
 
 
 
2019
 
 
 
300,520
 
2020
 
 
 
1,553,667
 
2021 and thereafter
 
 
 
2,042,635
 
Total
 
 
 
3,896,822
 
 
Valuation allowance was provided against deferred tax assets in entities where it was determined, it was more likely than not that the benefits of the deferred tax assets will not be realized. The Company had deferred tax assets which consisted of tax loss carry-forwards and others, which can be carried forward to offset future taxable income. The management determines it is more likely than not that part of deferred tax assets could not be utilized, so allowance was provided as of December 31, 2016 and 2015.