SBC Medical Group Holdings Inc Income Taxes Disclosure
NOTE 17 — INCOME TAXES
United States
SBC Medical Group Holdings Incorporated, SBC Medical Group, Inc., SBC Healthcare Inc., SBC Irvine, LLC, and Aikawa Medical Management, Inc. are incorporated in the United States and subject to federal income tax rate at 21% and California state income tax rate at 6.98%.
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We have incorporated the provisions that were effective during 2025 and assessed that the impacts did not have a material impact on our consolidated financial statements. We continue to assess any future impacts on our consolidated financial statements and will recognize the income tax effects beginning in the period in which they are effective.
NOTE 17 — INCOME TAXES (cont.)
Japan
The Company conducts its major businesses in Japan and is subject to tax in this jurisdiction. During the years ended December 31, 2025 and 2024, substantially all the taxable income of the Company was generated in Japan. As a result of its business activities, the Company files tax returns that are subject to examination by the local tax authority. Income taxes in Japan applicable to the Company are imposed by the national, prefectural, and municipal governments, and in the aggregate resulted in an effective statutory rate of approximately 34.69% for the years ended December 31, 2025 and 2024.
Vietnam
Shoubikai Medical Vietnam Co., Ltd. is incorporated in Vietnam and subject to income tax rate at 20% statutory tax rate with respect to the assessable income generated from Vietnam.
Singapore
Aesthetic Healthcare Holdings Pte. Ltd. and its subsidiaries, and SBC MEDICAL APAC PTE. LTD. are incorporated in Singapore and subject to income tax rate at 17% statutory tax rate with respect to the assessable profits generated from Singapore.
For the years ended December 31, 2025 and 2024, the Company’s income tax expenses are as follows:
|
|
For the Years |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Current |
|
$ |
25,693,625 |
|
|
$ |
41,183,012 |
|
Deferred |
|
|
5,326,982 |
|
|
|
(14,417,087 |
) |
Total |
|
$ |
31,020,607 |
|
|
$ |
26,765,925 |
|
After the adoption of ASU 2023-09 on a prospective basis, a reconciliation of the provision for income taxes to the amount computed by applying the 21% U.S. federal statutory income tax rate to income before income taxes for the year ended December 31, 2025 is as follows:
|
|
For the Year |
|
|||||
|
|
Amount |
|
|
Percent |
|
||
U.S. federal statutory tax rate |
|
$ |
17,232,072 |
|
|
|
21.00 |
% |
State income taxes, net of federal income tax effect |
|
|
5,727,613 |
|
|
|
6.98 |
% |
Foreign Tax Effects: |
|
|
|
|
|
|
||
Japan: |
|
|
|
|
|
|
||
Statutory tax rate difference |
|
|
6,364,700 |
|
|
|
7.76 |
% |
Deemed contribution in connection with disposal of property and equipment subject to tax |
|
|
2,813,334 |
|
|
|
3.43 |
% |
Non-taxable income |
|
|
(815,328 |
) |
|
|
(0.99 |
%) |
Effect of tax payments and dues |
|
|
(2,745,601 |
) |
|
|
(3.35 |
%) |
Others |
|
|
(833,226 |
) |
|
|
(1.02 |
%) |
Other tax jurisdictions |
|
|
(64,324 |
) |
|
|
(0.08 |
%) |
Non-deductible compensation |
|
|
3,077,800 |
|
|
|
3.75 |
% |
Other adjustments |
|
|
263,567 |
|
|
|
0.32 |
% |
Effective tax rate |
|
$ |
31,020,607 |
|
|
|
37.80 |
% |
NOTE 17 — INCOME TAXES (cont.)
For the year ended December 31, 2024, prior to the adoption of ASU 2023-09, a reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate is as follows:
|
|
For the Year |
|
|
U.S. federal statutory tax rate |
|
|
21.00 |
% |
State income tax expense, net of federal income tax effect |
|
|
6.98 |
% |
Effect of income tax rate difference under different tax jurisdictions |
|
|
8.79 |
% |
Expenses not deductible for tax purpose |
|
|
0.46 |
% |
Effect of change in valuation allowance |
|
|
2.10 |
% |
Effect of tax payments and dues |
|
|
(3.27 |
%) |
Other adjustments |
|
|
0.38 |
% |
Effective tax rate |
|
|
36.44 |
% |
The tax effects of temporary differences that give rise to the deferred income tax assets and liabilities on December 31, 2025 and 2024 are presented below:
|
|
December 31, |
|
|
December 31, |
|
||
Deferred income tax assets |
|
|
|
|
|
|
||
Revenue and expense adjustments |
|
$ |
1,820,241 |
|
|
$ |
2,317,931 |
|
Change in cash surrender value of life insurance policies |
|
|
— |
|
|
|
370,625 |
|
Lease liabilities |
|
|
1,708,975 |
|
|
|
1,507,518 |
|
Net operating losses carried forward |
|
|
— |
|
|
|
13,543,915 |
|
Impairment on intangible assets |
|
|
5,206,669 |
|
|
|
5,498,205 |
|
Fair value change on investment securities |
|
|
— |
|
|
|
877,026 |
|
Others |
|
|
1,232,218 |
|
|
|
178,597 |
|
Total deferred income tax assets |
|
|
9,968,103 |
|
|
|
24,293,817 |
|
Less: valuation allowance |
|
|
— |
|
|
|
(8,640,332 |
) |
Total deferred income tax assets, net |
|
$ |
9,968,103 |
|
|
$ |
15,653,485 |
|
|
|
December 31, |
|
|
December 31, |
|
||
Deferred income tax liabilities: |
|
|
|
|
|
|
||
Revenue and expense adjustments |
|
$ |
(1,797,967 |
) |
|
$ |
(2,602,712 |
) |
Change in cash surrender value of life insurance policies |
|
|
(2,403,269 |
) |
|
|
(1,720,120 |
) |
Right-of-use assets |
|
|
(1,668,573 |
) |
|
|
(1,415,168 |
) |
Intangible assets acquired through business combinations |
|
|
(16,374,832 |
) |
|
|
(354,739 |
) |
Others |
|
|
(84,000 |
) |
|
|
(688,698 |
) |
Total deferred income tax liabilities |
|
$ |
(22,328,641 |
) |
|
$ |
(6,781,437 |
) |
|
|
|
|
|
|
|
||
Deferred income tax assets, net |
|
$ |
4,014,294 |
|
|
$ |
9,798,071 |
|
Deferred income tax liabilities, net |
|
$ |
(16,374,832 |
) |
|
$ |
(926,023 |
) |
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company regularly assesses the ability to realize its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including its earnings history and results of recent operations, projected future taxable income, and tax planning strategies.
NOTE 17 — INCOME TAXES (cont.)
The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as the Company’s projections for growth. The adjustments of a valuation allowance against deferred tax assets may cause greater volatility in the effective tax rate in the periods in which the valuation allowance is adjusted. Based upon the level of historical taxable profit and projections for future taxable profit over the periods for which the deferred tax assets are deductible, management believes it is probable that the Company will utilize the benefits of these deferred tax assets as of December 31, 2025 and 2024. Uncertainty of estimates of future taxable profit could increase due to changes in the economic environment surrounding the Company, effects by market conditions, effects of currency fluctuations or other factors.
The following table presents income taxes paid, net of refunds:
|
|
For the Year |
|
|
|
|
2025 |
|
|
Japan |
|
$ |
36,270,188 |
|
U.S. |
|
|
920,000 |
|
Net total |
|
$ |
37,190,188 |
|
Uncertain tax positions
The Company evaluates each uncertain tax position (including the applicability of interest and penalties) based on technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2025 and 2024, the management considered the Company did not have any significant unrecognized uncertain tax positions. The Company does not anticipate in any significant increases or decreases in unrecognized tax benefits in the next twelve months from December 31, 2025. Open tax years in Japan are five years. The Company’s income tax returns filed in Japan for the tax years prior to March 31, 2023 were examined by the relevant tax authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
| 2023 | Mar 19, 2024 | |
| 2022 | Mar 9, 2023 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.