Natural Health Trends Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 6 - Income Taxes

Note 6 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

6. INCOME TAXES

The components of income before income taxes consist of the following (in thousands):

	Year Ended December 31,
	2012			2013

Domestic	$	(2,824	)	$	194
Foreign		5,430			3,997
Income before income taxes	$	2,606		$	4,191

The components of the income tax provision (benefit) consist of the following (in thousands):

	Year Ended December 31,
	2012			2013

Current:
Federal	$	–		$	10
Foreign		32			76
Total current taxes		32			86
Deferred foreign taxes		(56	)		16
Income tax provision (benefit)	$	(24	)	$	102

A reconciliation of the reported income tax provision (benefit) to the provision that would result from applying the domestic federal statutory tax rate to pretax income is as follows (in thousands):

	Year Ended December 31,
	2012			2013

Income tax at federal statutory rate	$	886		$	1,425
Effect of permanent differences		8			7
Increase in valuation allowance		672			430
Foreign rate differential		(1,576	)		(1,218	)
True up of foreign tax balances		1			(597	)
Other reconciling items		(15	)		55
Income tax provision (benefit)	$	(24	)	$	102

Deferred income taxes consist of the following (in thousands):

	December 31,
	2012			2013

Deferred tax assets:
Net operating losses	$	15,081		$	13,115
Stock-based compensation		352		–
Accrued expenses		104			268
Tax credits		501			512
Impairment of long-lived assets		76			88
Other		75			1
Total deferred tax assets		16,189			13,984
Valuation allowance		(16,141	)		(13,927	)
		48			57

Deferred tax liabilities:
Intangible assets		(43	)		(43	)
Accrued expenses		(91	)		(107	)
Prepaids	–				(11	)
Other		(6	)		(4	)
Total deferred tax liabilities		(140	)		(165	)
Net deferred tax liability	$	(92	)	$	(108	)

The Company has recorded a valuation allowance to equal its net deferred tax assets due to the uncertainty of future operating results. The valuation allowance will be reduced at such time as management believes it is more likely than not that the deferred tax assets will be realized. Any reductions in the valuation allowance will reduce future income tax provisions.

At December 31, 2013, the Company has U.S. federal net operating loss carryforwards of $33.0 million that begin to expire in 2021, if not utilized. The Company also has foreign net operating loss carryforwards totaling $7.3 million in various jurisdictions with various expirations, including $4.2 million in China with expirations from 2014 to 2017. The Company has not provided for U.S. federal and foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2013. Such earnings are intended to be reinvested indefinitely. Generally, such earnings become subject to U.S. income tax upon the remittance of dividends and under certain other circumstances. At December 31, 2013, it is not practicable to estimate the amount of deferred tax liability on such undistributed earnings.

- 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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