Taxation

12 Months Ended

Dec. 31, 2019

NOTE 11. Taxation

a)	Corporate Income Taxes

HUSN is incorporated in the BVI. Under the current law of the BVI, HUSN is not subject to tax on income or capital gains. Additionally, if dividends are paid by HUSN to its shareholders, no BVI withholding tax will be imposed.

HKIFS was incorporated in Hong Kong and does not conduct any substantial operations of its own. No provision for Hongkong profits tax has been made in the financial statements as HKFS has no assessable profits for the years ended December 31, 2019 2018 and 2017

The HUSN’s PRC subsidiary, Yingxin Yijia, CIFS (Xiamen) Financial Leasing and its variable interest entities, Sheng Ying Xin and its subsidiaries being incorporated in the PRC, are governed by the income tax law of the PRC and are subject to PRC enterprise income tax (“EIT”). Effective from January 1, 2008, the EIT rate of PRC is 25%, and applies to both domestic and foreign invested enterprises. Kashgar Sheng Ying Xin, which was incorporated in Kashgar City, Xinjiang Autonomous Region in People’s Republic of China, is exempted from income tax from its inception to December 31, 2020 and is subject to a tax rate of 25% after December 31, 2020.

The components of the income tax expense are as follows:

	Year ended December 31, 2019		Year ended December 31, 2018			Year ended December 31, 2017

Current	$	7,243	$	151,153		$	672,205
Deferred		-		(1,853,280	)		(38,890	)
Total	$	7,243	$	(1,702,127	)	$	633,315

Reconciliation of the income tax expenses at the PRC statutory EIT rate of 25% for the years ended December 31, 2019, 2018 and 2017 and the Company’s effective income tax expenses is as follows:

	Year ended December 31, 2019			Year ended December 31, 2018			Year ended December 31, 2017
(Loss)profit before income taxes	$	(61,988,515	)	$	(5,520,864	)	$	24,681,499
PRC statutory EIT rate		25	%		25	%		25	%
Income tax (benefit) expenses computed at statutory EIT rate		(15,497,129	)		(1,380,216	)		6,170,375
Reconciling items:
Valuation allowance		1,798,398			-			2,505
Effect of tax holidays		93,455			(2,209,107	)		(5,617,858	)
Temporary difference		13,369,701			1,586,726			-
Permanent difference		242,818			300,470			78,293
Income tax (benefit) expense		7,243		$	(1,702,127	)		633,315

b)	Deferred Taxes

Deferred income tax was measured using the enacted income tax rates for the periods in which they are expected to be reversed. Significant components of the Company’s deferred income tax assets and liabilities consist of follows:

	As of December 31, 2019			As of December 31, 2018

Deferred income tax assets		1,798,398			-
Net operating loss carry forwards	$	-		$	1,798,398
Total Deferred income tax assets		-			1,798,398
Less: Valuation allowance		(1,798,398	)		-
Net deferred income tax assets	$	-		$	1,798,398

		As of December 31, 2019		As of December 31, 2018
Deferred income tax liabilities
Intangible assets from business combination	$	-	$	-
Total deferred income tax liabilities	$	-	$	-

The Company’s NOL was mainly from the Company’s VIE and subsidiaries’ cumulative net operating losses (“NOL”) of approximately $ 59,607,294 as of December 31, 2019. Management considers projected future losses outweighs other factors and made a full allowance of related deferred tax assets.”

c)	Taxes Payable

Yingxin Yijia, CIFS (Xiamen) Financial Leasing and its variable interest entities, Sheng Ying Xin and its subsidiaries, who provided services in China and therefore are subject to Chinese value-added tax (“VAT”). Sales revenue represents the invoiced value of services, net of the VAT. Since August 1, 2015, Sheng Ying Xin was classified as a general taxpayer with VAT of 6%. Kashgar Sheng Ying Xin is subject VAT of 4.5% (75% of general taxpayer’s rate of 6%), which is a tax holiday for enterprises established in Kashgar. Both FuhuiSZ and Anytrust are general taxpayers and subject to a 6% VAT rate. Yingda Xincheng was classified as a small-scale taxpayer and the VAT is at 3%. Furthermore, VAT payable of these four companies are subject to a 12% surtax, which includes urban maintenance and construction taxes and additional education fees.

Taxes payable consisted of the following:

	As of December 31, 2019		As of December 31, 2018

Corporate income tax payable	$	423,563	$	758,136
Value added tax payable		548,276		2,938
Other surtaxes payable		14,356		37,925
Total	$	986,195	$	798,999

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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Hudson Capital Merger Sub I Inc. S-1