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Technology Stocks : Deswell Industries (DSWL) -- Ignore unavailable to you. Want to Upgrade?

To: Ron Bower who wrote (661)	4/16/1998 5:16:00 PM
From: kolo55	Read Replies (3) \| Respond to of 1418

Hmmm- interesting, but isn't Deswell a Chinese company now? That means that domestic tax laws will apply. I still think that domestic Chinese companies operating in the Economic Zones (where Deswell's operations are located), pay a lower tax rate than foreign JV enterprises. I suspect that the rate is similar to the favorable rate they give to certain foreign JV operations: "the rate of 15% if they are within the scope of projects encouraged by the state, such as energy and communications." There is one clause that seems to cover a foreign company's investment tax breaks: The Tax Law also provides that if a foreign party reinvests its share of the profits in the joint venture or in another joint venture project in China with a term of operation of more than five years, it may be eligible, on application, for a refund of 40% of the income tax paid on the invested amount.A full refund may be applied for and granted if an existing investor invests or reinvests it's share of profits in a "technologicallly advanced enterprise" or an "export oriented enterprise" with a term of operation of more than five years. As I surmised, it appears that reinvested capital appears to be applicable as a deduction in taxable income, although it seems its due to the fact that Deswell is a "technologically advanced enterprise" and a "export oriented enterprise". So Deswell should be reimbursed all taxes paid on monies reinvested as capital, if they are treated at least the same tax-wise as foreign or JV enterprises. Finally, I was aware they had a tax holiday on new ventures, I wonder if that is a good reason to move every 5 to 6 years (if that qualifies)? Even if all the above is true, over a period of 5 years or so Deswell's tax rate should climb up a bit. Whoa- just found a passage dealing with taxes as Note 8 in last year's Annual Report (1996). It even includes an estimated impact on earnings if they didn't get these special tax breaks. Everyone should read the report, and if they don't have a copy, get an Investors package from Deswell's IR firm. In 1996, the tax breaks saved 15 cents a share in taxes. Great job coming up with that passage. Thread: Any other opinions/interpretations on this? Paul