XMax Inc. Income Taxes Disclosure

Note 12 – Income Taxes

 

Taxes payable consisted of the following at December 31, 2025 and 2024:

 Schedule of Taxes Payable

		2025				2024
Income tax payable - current			-				(1,852,399	)

 

As of December 31, 2025 and 2024, current tax payable were nil million and $1.85 million, respectively. For 2024, current tax payable, $1.85 million was arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below).

 

As of December 31, 2025 and 2024, noncurrent tax payable were nil million, respectively, arising from a one-time transition tax recognized in the fourth quarter of 2017 on post-1986 foreign unremitted earnings (see below).

 

 

The (benefit) provision for income taxes on loss from continuing operations consisted of the following:

 Schedule of Components of Income Tax Expense (Benefit)

		2025				2024
Current:
Federal		$	194,021			$	-
State			800				2,400
Malaysia			(775,808	)			214
Income tax expense current			(580,987	)			2,614
Deferred:
Federal			-				-
State			-				-
Total provision expense for income taxes		$	(580,987	)		$	2,614

 

The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes from continuing operations:

 Schedule of Effective Income Tax Rate Reconciliation

		2025				2024
Tax at federal statutory rate		$	(106,257	)		$	(1,167,410	)
State and local income taxes, net of federal effect			800				-
Foreign tax effects
Malaysia
Foreign rate differential			(10,549	)			(128,754	)
Tax effects of liquidation			(691,414	)			-
Other foreign			(16,467	)			-
Stock based compensation			-				123,077
Non-deductible Expenses			-				-
Penalty			194,021				-
Others			(19,966	)			(779,043	)
Valuation allowance			68,845				1,954,744
Total provision for income taxes		$	(580,987	)		$	2,614

 

The following presents the aggregate dollar effects of the Company’s tax exemption from its continuing operations:

 Schedule of Aggregate Dollar Effects of the Company’s Tax Exemption

			2025				2024
Aggregate dollar effect of tax holiday		$	-			$	-

 

Deferred Tax Assets and Liabilities

 

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are comprised of the following:

 Schedule of Deferred Tax Assets And Liabilities

		2025				2024
Non-Current Deferred Tax Assets:
Accrued liabilities		$	408			$	57,773
Accrued Warranty Liability			8,955				3,796
Fed & CA amortization			2,489				5,587
Stock compensation			155,532				143,960
ASC 842 – lease liability			176,800				335,645
Inventory			-				-
U.S. NOL			5,214,957				5,374,809
Capital loss			734,976				734,976
Charitable Contribution			1,906				1,129
R&D Capitalization			2,047				794,736
Interest			1,944				1,944
Non-Current Deferred Tax Liabilities:
Fed & CA depreciation			(5,679	)			(7,926	)
Prepaid expenses			(4,114	)			(18,940	)
ASC 842- ROU Asset			(166,447	)			(320,454	)
Unrealized Gain on Preamble			(88,452	)			-
Net Non-Current Deferred Tax Assets before Valuation Allowance			6,035,322				7,107,035
Less: Valuation Allowance			(6,035,322	)			(7,107,035	)
Non-Current Deferred Tax Assets, Net:			-				-
Total Deferred Assets, Net:		$	-			$	-

 

 

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:

  Schedule of Income Taxes Paid(Net of Refunds Received)

		2025
Federal		$	1,304,247
State			-
Foreign			-
Cash paid for income taxes, net of refunds received		$	1,304,247

 

Nova LifeStyle, Inc. and Diamond Bar are subject to U.S. federal and state income taxes. Nova Furniture BVI is incorporated in the BVI. There is no income tax for a company domiciled in the BVI. Accordingly, the Company’s consolidated financial statements do not present any income tax provision related to the BVI tax jurisdiction where Nova Furniture BVI is domiciled.

 

For U.S. Federal income tax purpose, the Company has net operating loss, or NOL carryforwards of approximately $16.6 million and $ 15.1 million at December 31, 2025 and 2024, respectively. The Company has capital loss carryforwards of approximately $3.5 million at December 31, 2025.

 

For U.S. California income tax purpose, the Company has net operating loss, or NOL carryforwards of approximately $22.7 million and $20.6 million, at December 31, 2025 and 2024, respectively.

 

Malaysia has net operating loss, or NOL carryforwards of approximately $0 million at December 31, 2025.

 

Corporate income tax in Malaysia is calculated at the statutory rate of 24% of the estimated taxable profit for the year ended December 31, 2025.