XML 42 R24.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
17.
INCOME TAXES
Cayman Islands
Under the current laws of the Cayman Islands, the Group is not subject to tax on income or capital gains. Additionally, upon payment of dividends by the Group to its shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
Subsidiaries in Hong Kong are subject to Hong Kong Profits Tax rate at 16.5%, and foreign-derived income is exempted from income tax. There are no withholding taxes upon payment of dividends by the subsidiaries incorporated in Hong Kong to its shareholders.
 
Mainland China
Under the PRC Enterprise Income Tax (“EIT”) Law, which has been effective since January 1, 2008, domestic enterprises and Foreign Investment Enterprises (the “FIE”) are subject to a unified 25% enterprise income tax rate, except for certain entities that are entitled to preferential tax treatments. Preferential EIT rates at 15% is available for qualified “High and New Technology Enterprises” (“HNTEs”). The HNTE certificate is effective for a period of three years. Further, preferential EIT rates are available for qualified Software Enterprises whereby entities are entitled to full exemption from EIT for two years beginning from their first profitable calendar year and a 50% reduction for the subsequent three calendar years.
Certain PRC subsidiaries and VIEs, including Baidu Online, Baidu China, Baidu International and Baidu Netcom, etc. are qualified HNTEs and enjoy a reduced tax rate of 15%
for the years presented. An entity could re-apply for the HNTE certificate when the prior certificate expires. Historically, all of the Company’s subsidiaries and VIEs successfully re-applied for the certificates when the prior ones expired. Certain subsidiaries enjoyed a reduced tax rate as qualified Software Enterprise from 2021 to 2023.
Under the current EIT Law, dividends for earnings derived from January 1, 2008 and onwards paid by PRC entities to any of their foreign
non-resident
enterprise investors are subject to a 10% withholding tax. A lower tax rate will be applied if tax treaty or arrangement benefits are available. Under the tax arrangement between the PRC and Hong Kong, the reduced withholding tax rate for dividends paid by PRC entities is 5% provided the Hong Kong investors meet the requirements as stipulated by relevant PRC tax regulations, such as the beneficiary owner test. Capital gains derived from the PRC are also subject to a 10% PRC withholding tax.
Income (loss) before income taxes consists of:
 
    
For the years ended December 31,
  
    
2021
     
2022
     
2023
     
2023
  
    
RMB
     
RMB
     
RMB
     
US$
  
    
(In millions)
  
Mainland China
      15,055        18,306        28,449        4,008  
Non-Mainland China
      (4,277 )       (8,194 )       (3,251 )
 
      (458 )
 
  
 
 
     
 
 
     
 
 
     
 
 
  
     10,778        10,112        25,198        3,550  
  
 
 
     
 
 
     
 
 
     
 
 
  
Except for the investment related loss recognized, the
pre-tax
losses from
non-Mainland
China operations consist primarily of operating costs, administration expenses and interest expenses.
Income taxes consist of:
 
    
For the years ended December 31,
  
    
2021
     
2022
     
2023
     
2023
  
    
RMB
     
RMB
     
RMB
     
US$
  
    
(In millions)
  
Current income tax
      3,636        3,163        3,812        537  
Income tax refund due to reduced tax rate
      —         (468 )       —        —  
Adjustments of deferred tax assets due to change in tax rates
      109        119        111        16  
Deferred income tax benefit
     (558 )       (236 )       (274 )
 
      (39 )
 
  
 
 
     
 
 
     
 
 
     
 
 
  
     3,187        2,578        3,649        514  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
The reconciliation of the actual income taxes to the amount of tax computed by applying the aforementioned statutory income tax rate to
pre-tax
income is as follows:
 
    
For the years ended December 31,
  
    
2021
     
2022
     
2023
    
2023
  
    
RMB
     
RMB
     
RMB
    
US$
  
    
(In millions, except for per share data)
  
Expected taxation at PRC statutory tax rate
      2,694        2,541        6,299       887  
Effect of differing tax rates in different jurisdictions
      656        1,976        410       58  
Non-taxable
income
      (89 )       (44 )       (456 )     (64 )
Non-deductible
expenses
      965        534        1,928       272  
Research and development super-deduction
      (1,645 )       (2,274 )       (3,067 )     (432 )
Effect of PRC preferential tax rates and tax holiday
      (1,557 )       (1,507 )       (1,833 )     (259 )
Effect of tax rate changes on deferred taxes
      109        119        111       16  
Reversal of prior year’s income taxes
      (734 )       (913 )       (156 )     (22 )
PRC withholding tax
      615        181        574       81  
Change in valuation allowance
      2,173        1,965        (161 )     (23 )
  
 
 
     
 
 
     
 
 
    
 
 
  
Taxation for the year
      3,187        2,578        3,649       514  
  
 
 
     
 
 
     
 
 
    
 
 
  
Effective tax rate
      29.6%        25.5%        14.5 %      14.5 % 
  
 
 
     
 
 
     
 
 
    
 
 
  
Effect of preferential tax rates inside the PRC on basic earnings per Class A and Class B ordinary share
      0.56        0.54        0.65       0.09  
  
 
 
     
 
 
     
 
 
    
 
 
  
The tax effects of temporary differences that gave rise to the deferred tax balances at December 31, 2022 and 2023 are as follows:
 
    
As of December 31,
  
    
2022
    
2023
    
2023
  
    
RMB
    
RMB
    
US$
  
    
(In millions)
  
Deferred tax assets:
       
Allowance for credit losses
      616       704       99  
Accrued expenses, payroll and others
      3,861       3,602       507  
Fixed assets depreciation and intangible assets amortization
      3,767       3,532       497  
Net operating loss carry-forwards
      4,176       4,223       595  
Less: valuation allowance
      (10,033 )      (9,872 )
 
     (1,390 )
 
  
 
 
    
 
 
    
 
 
  
Deferred tax assets, net
      2,387       2,189       308  
  
 
 
    
 
 
    
 
 
  
 
    
As of December 31,
  
    
2022
     
2023
     
2023
  
    
RMB
     
RMB
     
US$
  
    
(In millions)
  
Deferred tax liabilities:
   
Long-lived assets arising from acquisitions
      428        220        31  
Withholding tax on PRC subsidiaries’ undistributed earnings
      1,685        1,475        207  
Tax on capital gains
      797        908        128  
Others
      246        211        30  
  
 
 
     
 
 
     
 
 
  
      3,156         2,814         396  
  
 
 
     
 
 
     
 
 
  
 
As of December 31, 2023, the Group had tax losses of approximately RMB23.7 billion (US$3.3 billion) derived mainly from entities in the PRC and Hong Kong. The tax losses in the PRC can be carried forward for five years to offset future taxable profit, and the period is currently extended to 10 years for entities qualified as HNTE. The tax losses of entities in the PRC will expire from 2024 to 2033, if not utilized. The tax losses in Hong Kong can be carried forward with no expiration date.
As of December 31, 2023, dividend distribution withholding tax for the potential remittance of earnings from the PRC subsidiaries to offshore entities was RMB1.5 billion (US$207 million). The Group believes that the underlying dividends will be distributed in the future for offshore use, such as merger and acquisition activities. The Group did not provide for additional deferred income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries during the years presented on the basis of its current intent to permanently reinvest its foreign subsidiaries’ earnings. As of December 31, 2023, the total amount of undistributed earnings from the PRC subsidiaries and the VIEs for which no withholding tax has been accrued was RMB171.8 billion (US$24.2 billion). Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
As of December 31, 2022 and 2023, the Group has unrecognized tax benefits of RMB670 million and RMB670 million (US$94 million), respectively, primarily related to the tax-deduction of accrued expenses which were presented in “Other non-current liabilities” in the consolidated balance sheets, if ultimately recognized would impact the annual effective tax rate. It is possible that the amount of unrecognized benefits will change in the next 12 months, however, an estimate of the range of the possible change cannot be made at this moment.