Quarterly report pursuant to sections 13 or 15(d)

INCOME TAXES

v2.4.0.8
INCOME TAXES
6 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
 
23.
INCOME TAXES
 
China Dredging
 
CDGC is incorporated in the BVI, the laws of which do not require CDGC to pay any income taxes or other taxes based on revenue, business activity or assets.  CDGC has subsidiaries domiciled and operating in other countries and those entities file separate tax returns in the respective jurisdictions in which they are domiciled or operate.
 
Two of the CDGC’s subsidiaries, China Dredging HK and Master Gold, are domiciled in Hong Kong and would be subject to statutory profit tax in that jurisdiction of 16.5%. CDGC’s VIEs, Wonder Dredging and Fujian Service, and CDGC’s other subsidiaries, Fujian Wanggang, Pingtan Xingyi and Pingtan Zhuoying operate in the PRC, where they are subject to a 25% statutory profit tax.
 
A reconciliation of the expected income tax expense to the actual income tax expense for the three and six months ended June 30, 2013 and 2012 was as follows:
 
 
 
For the Three Months Ended
June 30,
 
 
For the Six Months Ended
June 30,
 
 
 
2013
 
2012
 
2013
 
2012
 
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before tax
 
$
23,236,499
 
$
29,257,857
 
$
34,779,886
 
$
58,256,571
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected PRC income tax expense at
    statutory tax rate of 25%
 
$
5,809,125
 
$
7,314,464
 
$
8,694,972
 
$
14,564,143
 
Add: Non-deductible expenses
 
 
30,344
 
 
213,493
 
 
58,878
 
 
294,012
 
Less: Non-taxable income
 
 
(4,269)
 
 
(650)
 
 
(464,456)
 
 
(1,021)
 
Less: Tax exemption*
 
 
(546,511)
 
 
-
 
 
(693,981)
 
 
-
 
Effect of exchange rate
 
 
(15,362)
 
 
6,633
 
 
(118,835)
 
 
6,702
 
Actual income tax expense
 
$
5,273,327
 
$
7,533,940
 
$
7,476,578
 
$
14,863,836
 
 
* The income tax of Pingtan Xingyi was calculated by 2% of revenue and it was approved by the Tax Bureau.
 
The PRC tax system is subject to substantial uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in PRC tax laws or their interpretation or their application will not subject CDGC to substantial PRC taxes in future. 
 
No deferred tax liability has been provided as the amount involved is estimated to be immaterial. Fujian Service and Pingtan Xingyi have analyzed the tax positions taken or expected to be taken in their tax filings and have concluded they have no material liability related to uncertain tax positions.  
 
For the three and six months ended June 30, 2013 and 2012, there was no unrecognized tax benefit. Management does not anticipate any potential future adjustments in the next twelve months which would result in a material change to its financial tax position. As of June 30, 2013 and December 31, 2012, CDGC did not accrue any interest and penalties.