INCOME TAXES

12 Months Ended

Dec. 31, 2013

19 - INCOME TAXES

Corporation Income Tax ("CIT")

(i) The Company is incorporated in the state of Nevada. Under the current law of Nevada, the Company is not subject to state corporation income tax. The Company became a holding company and does not conduct any substantial operations of its own after the Share Exchange. No provision for federal corporate income tax has been made in the financial statements as the Company has no taxable income for the year ended December 31, 2013. And earnings in the PRC are intended to be permanently reinvested in the PRC operation.

Trunkbow was established in the British Virgin Islands on July 17, 2009. Under the current laws of the British Virgin Islands, Trunkbow is not subject to tax on income or capital gains. In addition, upon payments of dividends by Trunkbow, no British Virgin Islands withholding tax is imposed.

Trunkbow Hong Kong was incorporated in Hong Kong on July 9, 2004. Taxable profits are subject to Hong Kong profits tax on corporations at the rate of 16.5%. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

(ii) PRC subsidiaries and VIEs

The subsidiaries and VIEs incorporated in the PRC are generally subject to a corporate income tax rate of 25% commencing January 1, 2008 except for those subsidiaries and VIEs that enjoy tax holidays or preferential tax treatment, as discussed below.

Trunkbow Shandong

Trunkbow Shandong, a PRC company, is a wholly foreign-owned entity under PRC law and is governed by the income tax law of the PRC and is subject to PRC enterprise income tax. The statutory income tax rate commencing January 1, 2008 was 25%.

On October 16, 2009, Trunkbow Shandong was certified as a software enterprise by Shandong Economic and Information Technology Committee. Pursuant to the PRC tax laws, newly established and certified software enterprises are entitled to tax preferential policies of full exemption from income tax for the first two years and a 50% reduction for the next three years, commencing from the first profit-making year after offsetting all tax losses carried forward from the previous five years. The first profit making year for Trunkbow Shandong was 2009. On January 7, 2010, Trunkbow Shandong obtained the official approval from the tax bureau of Shandong Province Jinan City High-tech Industry Development Zone on the preferential tax exemption.

Pursuant to the aforementioned taxation laws, Trunkbow Shandong was exempt from income tax for the years ended December 31, 2009 and 2010, and thereafter, a half tax rate of 12.5% will be enacted for the years ended December 31, 2011, 2012 and 2013.

In March 2012, Trunkbow Shandong was recognized as New and High-Tech Enterprise. Under the Enterprise Income Tax Law effective from January 1, 2008, Trunkbow Shandong will be entitled to the 15% of preferential tax rate for the years ended December 31, 2014, 2015 and 2016.

Trunkbow Shenzhen

Trunkbow Shenzhen, a PRC company, is a wholly foreign-owned entity under PRC law. Because it was incorporated in Shenzhen, a special economic zone in the PRC, is entitled to preferential income tax rate of 15% in 2007. According to the pronouncement of tax bureau, for companies established after March 16, 2007, the income tax rate will be immediately raised to the unified tax rate of 25% started from January 1, 2008. As Trunkbow Shenzhen was established on September 7, 2007, the income tax rate from year 2008 on was 25%.

On June 8, 2011, Trunkbow Shenzhen was certified as a software enterprise by Shenzhen Technology, Industry, Commerce and Information Committee. Pursuant to the PRC tax laws, newly established and certified software enterprises are entitled to tax preferential policies of full exemption from income tax for the first two years and a 50% reduction for the next three years, commencing from the first profit-making year after offsetting all tax losses carried forward from the previous five years. Trunkbow Shenzhen started profit-making in 2012 and is applying for tax exemption.

Trunkbow Technologies

Trunkbow Technologies was registered in Shenzhen, a special economic zone in the PRC, which is entitled to preferential income tax rates of 18% and 15% in 2008 and 2007 respectively. According to the pronouncement of tax bureau, for companies established before March 16, 2007, the income rate will gradually increase to 25% within 4 years, 20% in 2009, 22% in 2010, 24% in 2011 and 25% from 2012.

Delixunda

Delixunda was registered in Beijing, the PRC. The applicable income tax rate for Delixunda was 25% for the year ended December 31, 2012. Delixunda was in net operation loss as of December 31, 2012, and no income tax provision was recorded.

The current and deferred portions of income tax expense included in the consolidated statements of income and comprehensive income are as follows:

	Years ended December 31,
	2013			2012

Current income tax expense
China	$	926,877		$	2,642,846
Other jurisdiction		0			0
Deferred income tax
China		(248,229	)		(822,751	)
Other jurisdiction		0			0
Income tax expense	$	678,648		$	1,820,095

2) Deferred tax assets

	December 31,		December 31,
	2013		2012

Deferred tax assets	$	1,223,861	$	942,028

Deferred tax asset as of December 31, 2013 and 2012 represented the deferred income tax asset arising from the allowance for doubtful debts of $9,790,884 and $7,536,221 respectively.

The following is a reconciliation of tax computed by applying the statutory income tax rate to PRC operations to income tax expenses for years ended December 31, 2013 and 2012 respectively:

	Years Ended December 31,
	2013			2012

PRC statutory tax rate		25	%		25	%
Accounting income before tax	$	6,868,876		$	18,938,320
Computed expected income tax expenses		1,717,219			4,734,580
Accumulated loss from subsidiaries and VIEs		120,474			141,258
Non-deductible expenses		66,228			119,834
Less: non taxable income		581,255			416,902
Add: Prior year adjustment		0			(18,969	)
Less: tax exemption		644,018			2,739,706
Income tax expenses	$	678,648		$	1,820,095

- 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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Trunkbow International Holdings Ltd 10-K