Jerash Holdings (US), Inc. Income Taxes Disclosure

NOTE 17 – INCOME TAX

 

Jerash Garments, Jerash Embroidery, Chinese Garments, Paramount, Jerash The First, MK Garments, and Kawkab Venus are subject to the regulations of the Income Tax Department in Jordan. Effective January 1, 2019, the Jordanian government reclassified the area where Jerash Garments and its subsidiaries are to a Development Zone. In accordance with the Development Zone law, Jerash Garments and its subsidiaries were subject to income tax at income tax rate of 20% plus a 1% social contribution effective from January 1, 2024. Effective from October 1, 2025, Jerash Garments has been granted tax concession at a corporate income tax rate of 10% plus a 1% social contribution in accordance with the Jordanian Income Tax Law.

 

The foreign earnings of Jerash Garments and its subsidiaries are subject to U.S. taxation at the Jerash Holdings level under the new Global Intangible Low-Taxed Income (“GILTI”) regime.

 

The provision for income taxes consisted of the following:

 

		For the Fiscal Years Ended March 31,
		2026				2025
Domestic and foreign components of income (loss) before income taxes
Domestic		$	(2,097,096	)		$	(1,075,059	)
Foreign			6,844,542				1,226,250
Total		$	4,747,446			$	151,191

		For the Fiscal Years Ended March 31,
		2026				2025
Provision (benefit) for income taxes
Current tax:
U.S. federal		$	(5,594	)		$	395,067
U.S. state and local			750				750
Foreign			1,124,935				436,854
Total Current Tax			1,120,091				832,671
Deferred tax:
U.S. federal			(47	)			158,449
Total deferred tax			(47	)			158,449
Total tax		$	1,120,044			$	991,120
Effective tax rates			23.6	%			655.5	%

 

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 3 – Recent Accounting Pronouncements, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the fiscal year ended March 31, 2026 was as follows:

 

		For the Fiscal Year Ended March 31, 2026
		Amount				Percent
U.S. Federal Statutory Tax Rate		$	996,963				21.0	%
State and Local Income Taxes, Net of Federal Income Tax Effect			593				0.0	%
Foreign Tax Effects
Jordan
Statutory tax rate difference			(67,075	)			(1.4	)%
Foreign tax attributes			(56,933	)			(1.2	)%
Valuation allowance			56,933				1.2	%
Hong Kong (HK)
Statutory tax rate difference			(241,315	)			(5.1	)%
Foreign tax attributes			10,444				0.2	%
Valuation allowance			(10,444	)			(0.2	)%
People’s Republic of China (PRC)
Statutory tax rate difference			(4,028	)			(0.1	)%
Foreign tax attributes			81,490				1.7	%
Valuation allowance			(81,490	)			(1.7	)%
Other foreign rate differentials			—				0.0	%
Effect of Cross-Border Tax Laws
Global intangible low-taxed income (GILTI)			433,547				9.1	%
Subpart F income			323,199				6.8	%
Tax Credits
GILTI-related credits			(259,669	)			(5.5	)%
Subpart F-related credits			(89,191	)			(1.9	)%
Other tax credits			—				0.0	%
Changes in Valuation Allowances			—				0.0	%
Nontaxable or Nondeductible Items			121,699				2.6	%
Changes in Unrecognized Tax Benefits			—				0.0	%
Other Adjustments			—				0.0	%
Return to Provision (RTP)			(94,679	)			(2.0	)%
Effective Tax Rate		$	1,120,044				23.6	%

The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the fiscal year ended March 31, 2025 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

 

		For the Fiscal Year Ended March 31, 2025
Tax at statutory rate		$	31,750
State tax, net of federal benefit			593
Non-deductible expenses			(57,723	)
Non-taxable income			—
Global Intangible Low-Taxed Income, net			—
Cross-border tax effect - Subpart F income			549,151
Tax Credits			(52,724	)
Foreign tax rate differential			179,343
Foreign tax attributes			190,817
Change in Valuation Allowance			(190,817	)
Provision to return adjustments			165,440
Uncertain Tax Provision: Amended tax returns			175,290
Total		$	991,120

 

Tax payments in terms of jurisdiction consisted of the following:

 

		For the Fiscal Years Ended March 31,
		2026				2025
Jurisdiction
U.S. Federal		$	562,711			$	333,960
U.S. State and Local			500				500
Foreign - Jordan			685,510				1,011,997
Foreign - Others			23,870				52,227
Total		$	1,272,591			$	1,398,684

Unrecognized tax benefits are summarized as follows:

 

		Fiscal 2026
Unrecognized tax benefit as of March 31, 2025		$	175,290
Less: Tax positions of prior years (Subpart F income inclusion on amended federal tax returns)
Fiscal Year(s) Affected: FY 2022			(80,048	)
Fiscal Year(s) Affected: FY 2023			(69,981	)
Payments during the year			(25,261	)
Unrecognized tax benefit as of March 31, 2026		$	0

 

All unrecognized tax provision had been paid as of March 31, 2026.

 

The Company’s deferred tax assets and liabilities as of March 31, 2026 and 2025 consisted of the following:

 

Deferred tax liabilities		As of March 31, 2026				As of March 31, 2025
Deferred tax liabilities		$	(73	)		$	(120	)
Net operating losses carried forward			1,940,213				1,975,215
Less: valuation allowance			(1,940,213	)			(1,975,215	)
Deferred tax liabilities		$	(73	)		$	(120	)

 

Deferred tax assets are reduced by a valuation allowance when it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2026 and 2025, the allowance for deferred tax assets was $1,940,213 and $1,975,215, respectively. The allowance is provided for net operating loss of foreign subsidiaries.

 

As of March 31, 2026, the Company had cumulative book-tax basis differences in its foreign subsidiaries of approximately $18.5 million. The Company has not recorded a U.S. deferred tax liability for the book-tax basis in its foreign subsidiaries as these amounts continue to be indefinitely reinvested in foreign operations. The reversal of this temporary difference would occur upon the sale or liquidation of the Company’s foreign subsidiaries, and the estimated impact of the reversal of this temporary difference is approximately $3.9 million. As of March 31, 2026 and 2025, there were $nil and $175,290 and uncertain tax positions, respectively.

 

The One Big Beautiful Bill Act was enacted during the period. The Company has evaluated the provisions of the legislation and recorded the effects of changes in tax law in accordance with ASC 740. The impact primarily relates to remeasurement of deferred tax assets and liabilities at the enacted tax rates, as well as adjustments to current tax expense where applicable.

 

The Company files income tax returns in the U.S. federal, state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to April 1, 2019.