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10-Q - SEPTEMBER 30, 2011 QUARTERLY REPORT - CHINA PEDIATRIC PHARMACEUTICALS, INC.cpdu_2012sept30-10q.htm
EX-31.02 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - CHINA PEDIATRIC PHARMACEUTICALS, INC.exhibit_31-2.htm
EX-31.01 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. - CHINA PEDIATRIC PHARMACEUTICALS, INC.exhibit_31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - CHINA PEDIATRIC PHARMACEUTICALS, INC.Financial_Report.xls
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EX-32.01 - CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. - CHINA PEDIATRIC PHARMACEUTICALS, INC.exhibit_32-1.htm
v2.4.0.6
Income Taxes
9 Months Ended
Sep. 30, 2012
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 9 - INCOME TAXES

The Company’s (loss) income before income taxes for the three and nine months ended September 30, 2012 and 2011 comprised of the following:

 

Three months ended September 30, Nine months ended September 30,
(Loss) Income before income taxes: 2012 2011 2012 2011
USA $ - $ 241,250 $ (9,693) $ 5,762,500
Hong Kong - - - -
PRC (3,580,461) (4,750,907) (5,808,320) (6,293,489)
Total (loss) income from all tax jurisdictions $ (3,580,461) $ (4,509,657) $ (5,818,013) $ (530,989)

 

Provision for income taxes for all tax jurisdictions for the three and nine months ended September 30, 2012 and 2011 is as follows:

 

Provision for income taxes Three months ended September 30, Nine months ended September 30,
2012 2011 2012 2011
USA $ - $ - $ - $ -
PRC - - - 200,825
Total income tax expense from all tax jurisdiction $ - $ - $ - $ 200,825

 

USA Income Taxes

 

The Company is registered in the State of Nevada and is subjected to USA tax law. The recognition of income tax at statutory rate to effective rate for the three and nine months ended September 30, 2012 and 2011 is as follows:

 

Three months ended September 30, Nine months ended September 30,
2012 2011 2012 2011
Income (loss) before taxes from USA $ - $ 241,250 $ (9,693) $ 5,762,500
Statutory tax rate 34% 34% 34% 34%
Income tax at statutory tax rate - 82,025 (3,296) 1,959,250
Permanent tax difference due to derivative income (82,025) - (1,959,250)
Increase in valuation allowance - - 3,296 -
Income tax expense at effective rate $ - $ - $ - $ -

 

 

PRC Income Taxes

 

Pursuant to the State Council's Regulations on Encouraging Investment in and Development, Shaanxi Jiali was granted a reduction in its income tax rate under which it paid no income taxes from January 1, 2006 to December 31, 2007. Since 2008, the Company’s China operation is subject to PRC standard enterprise income tax rate of 25% based on its taxable net profit.  However, due to its “High Technology Business” status, the National Tax Bureau in Xi’an High-Tech Industries Development Zone granted Shaanxi Jiali a reduced tax rate of 15% as long as Shaanxi Jiali meets the high-tech enterprise qualification.

 

Provision for income taxes for the three and nine months ended September 30, 2012 and 2011 is reconciled as follows:

 

  Three months ended September 30,   Nine months ended September 30,
   2012    2011    2012    2011
Income (loss) before taxes from PRC operations $ (3,580,461)   $ (4,750,907)   $ (5,808,320)   $ (6,293,489)
Statutory tax rate   15%     15%     15%     15%
Income tax at statutory tax rate   (537,069)     (712,636)     (871,248)     (944,023)
Effects of permanent tax differences   -       712,636     2,344     1,144,848
Increase in valuation allowance   537,069     -       868,904     -  
Income tax expense at effective rate $ -     $ -     $ -     $ 200,825

 

Subject to the approval of the relevant tax authorities in the PRC, the Company had tax losses carry-forward against future years’ taxable income expiring in 2016 and 2017.

 

Deferred Income Tax Asset

 

The primary components of temporary differences which might give rise to the Company’s deferred tax assets as at September 30, 2012 and December 31, 2011 were as follows:

 

  As at
  September 30,    December 31,
   2012    2011
USA $             3,400    $              104
PRC        1,925,324        1,056,420
         1,928,724        1,056,524
Less:  valuation allowance   (1,928,724)     (1,056,524)
Deferred income tax benefit, net of valuation allowance $                   -      $                 -  

 

Deferred tax asset which may arise as a result of these losses have been offset in these consolidated financial statements by a valuation allowance due to the uncertainty surrounding their realization.

 

Deferred USA income taxes have not been provided on the undistributed income of the Company’s foreign subsidiaries and controlled VIE, because the Company does not plan to initiate any action that would require the payment of USA income taxes.

Uncertain Tax Positions

 

FASB ASC 740-10-25 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Under the new Corporate Income Tax Law in the PRC (“CIT”), effective on January 1, 2008, the Company may be deemed to be a resident enterprise by the PRC tax authorities. If the Company was deemed to be resident enterprise, the Company may be subject to the CIT at 25% on the worldwide taxable income and dividends paid from PRC subsidiaries to their overseas holding companies may be exempted from 10% PRC withholding tax. Except for certain immaterial interest income from bank deposits placed with financial institutions outside the PRC, all of the Company’s income is generated from the PRC operation. Given the immaterial amount of income generated from outside the PRC and the PRC subsidiaries do not intend to pay dividend in the foreseeable future, management has determined the impact arising from resident enterprise rules on the Company’s financial position is not significant. Management evaluated the Company’s overall tax positions and has determined that no provision for uncertain income tax positions is necessary as of September 30, 2012 and December 31, 2011.

 

Currently the Company is not subject to examination by major tax jurisdictions, but the tax authority in PRC has the right to examine the Company’s tax position in all past years.