Letter To Shareholders - Mitac

and development and parts of employees’ training for tax credits were assessed as
not qualified for tax credits and other incomes were added, which resulted in
additional tax payable for years 2005, 2006 and 2007. Since there were unused
tax credits before 2004, the Company was not assessed an additional tax payable
for year 2004. The tax re-examination for the 2004 income tax return had been
dismissed by the Tax Authority, so the Company filed a tax appeal for that year.
The Company has assessed the income tax effects for all the above cases and
accrued relevant tax liabilities in the financial statements.
F. Under the PRC tax regulations, the corporate income tax for the Mainland China
subsidiary shall be levied at the rate of 25 %. However, as MiTAC Computer
(Kunshan) Co. Ltd. is a foreign-invested manufacturing enterprise established in
the PRC, according to the Corporate Income Tax Law of the PRC, it is exempt
from corporate income tax for the first and second profit-making years and is
subject to a 50% reduction of corporate income tax from the third through fifth
profit-making years. Pursuant to Article 57 of the Corporate Income Tax Law
of the PRC (“new tax law”) passed at the National People’s Congress held on
March 16, 2008, those enterprises which were established before the effective
date of new tax law and have enjoyed tax relief shall be assessed at the tax rate
regulated by new tax law after five-year enforcement of the law, and those
enterprises which enjoy tax relief for a specific period can continue enjoying tax
relief until due date, while for those enterprises which have not reported any
profit and not enjoyed tax relief, the tax grace period starts from January 1, 2008.
Accordingly, the regulatory corporate income tax rate was 20% for 2009.
However, MiTAC Computer (Kunshan) Co. Ltd. was assessed at the tax rate of
10% for that year because of the 50% tax reduction; MiTAC Research (ShangHai)
Ltd. was assessed at the tax rate of 15% for meeting the qualification for national
supportive high-tech enterprise on November 25, 2008.
G. Unappropriated earnings
December 31,
2009 2008
Earnings earned before 1998 $ 305,502 $ 305,502
Earnings earned in and after
1998 7,874,938 7,936,909
$ 8,180,440 $ 8,242,411
H.
December 31, 2009 December 31, 2008
Balance of stockholders’
tax credit account $ 1,425,742 $ 1,439,758
2009 (estimated) 2008
Ratio of deductible tax
credit $ 18.10% $ 17.62%
~130~