NOTE 3 - INCOME TAXES

9 Months Ended

Sep. 30, 2018

Note 3. Income taxes

Deferred income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Reconciliation of the income tax expense / (benefit) computed at the U.S. Federal income tax rate to the Company’s reported income tax expense / (benefit) for the three month ended September 30, 2018 and September 30, 2017 is as follows:

	For three months ended		For nine months ended
	September 30, 2018	September 30, 2017	September 30, 2018	September 30, 2017
	$	$	$	$
Profit / (loss) from operations before income tax	(5,939)	1,115	(2,381)	(24,107)
Income tax rate	21%	34%	21%	34%
Income tax expense at the U.S Federal tax	(1,247)	379	(500)	(8,196)
Adjustments to derive effective tax rate:
State and local net of federal benefit	-	-	-	-
Non-deductible stock bases compensation	-	-	-	-
Other non-deductible expenses	-	-	-	-
Foreign rate differentials	-	-	-	-
Non allowable carryover of losses	249	-	100	-
Valuation allowance	998	(379)	400	8,196
Income tax (benefit) / expenses	-	-	-	-

The ultimate realization of deferred tax assets depends primarily on the Company’s ability to generate sufficient timely future income of the appropriate character in the appropriate taxing jurisdiction.

At September 30, 2018, Company has no unrecognized tax benefits.

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

	For three months ended		For nine months ended
	September 30, 2018	September 30, 2017	September 30, 2018	September 30, 2017
Deferred tax assets	-	-	-	-
Net income / (loss)	(5,939)	1,115	(2,381)	(24,107)
Deferred tax liability	-	-	-	-
Net deferred tax assets	(998)	379	(400)	(8,196)
Less: Valuation allowance	998	(379)	400	8,196
Deferred tax asset - net valuation allowance	-	-	-	-

On an interim basis, the Company has a net operating loss of $125,146 and an allowable loss carryover of approximately $124,670 available to offset future income for income tax reporting purposes, out of which $122,765 which will expire in various years through 2037, if not previously utilized. However, the Company’s ability to use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382.

The Company adopted the provisions of ASC 740-10-50, formerly FIN 48, and “Accounting for Uncertainty in Income Taxes”. The Company had no material unrecognized income tax assets or liabilities as of September 30, 2018.

The Company’s policy regarding income tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax purposes. During the period January 1, 2018 to September 30, 2018, there was no income tax, or related interest and penalty items in the income statement, or liabilities on the balance sheet. The Company files income tax returns in the U.S. federal jurisdiction and Nevada state jurisdiction. We are not currently involved in any income tax examinations.

Impact of the Tax Cuts and Jobs Act

The tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted on December 22, 2017 and provides for significant changes to U.S. tax law. Among other provisions, the Tax Reform Act reduces the U.S. corporate income tax rate to 21%, effective in 2018. The Tax Reform Act also provides for a transition to a new territorial system of taxation and generally requires companies to include certain untaxed foreign earnings of non-U.S. subsidiaries into taxable income in 2017 (“Transition Tax”). Additionally, the Securities Exchange Commission staff has issued SAB 118, which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. Because the Company is still in the process of analyzing certain provisions of the Tax Act, the Company has determined that the adjustment to its deferred taxes and the Transition Tax are provisional amounts as permitted under SAB 118.

QMC Systems, Inc. 10-Q