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Income tax (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Schedule of the current and deferred portions of income tax expense included in the consolidated statements of Comprehensive Income

The current and deferred portions of income tax expense included in the consolidated statements of comprehensive income are as follows:

		For the year ended December 31,
		2016				2017				2018
		RMB				RMB				RMB
Income (loss) before income tax expenses
PRC entities			1,914,432				2,919,350				3,494,192
Non-PRC entities (a)			(130,621	)			(28,172	)			(959,721	)
Total			1,783,811				2,891,178				2,534,471
Current income tax expenses
PRC entities			(288,282	)			(402,012	)			(379,130	)
Non-PRC entities			-				(9,880	)			(48,931	)
Total			(288,282	)			(411,892	)			(428,061	)
Deferred income tax benefit (expenses)
PRC entities			7,768				(3,919	)			(25,081	)
Non-PRC entities			-				-				(24,565	)
Total			7,768				(3,919	)			(49,646	)
Income tax expenses
PRC entities			(280,514	)			(405,931	)			(404,211	)
Non-PRC entities			-				(9,880	)			(73,496	)
Total			(280,514	)			(415,811	)			(477,707	)

(a) The loss before tax incurred by non-PRC entities for the year ended December 31, 2018 was mainly due to the fair value loss on derivative liabilities amouting to RMB2,285,223. This fair value loss was incurred by Huya whose applicable tax rate is zero, therefore the tax impact related to this fair value loss was included in “effect of different tax rates available to different jurisdictions” in the reconciliation table below.

Schedule of the reconciliation of total tax expense computed by applying the respective statutory income tax rate to pre-tax income

The reconciliation of total tax expense computed by applying the respective statutory income tax rate to pre-tax income is as follows:

		For the year ended December 31,
		2016				2017				2018
PRC Statutory income tax rate			(25.0	)%			(25.0	)%			(25.0	)%
Effect of tax holiday and preferential tax benefit			11.6	%			13.2	%			16.5	%
Effect of different tax rates available to different jurisdictions			(1.7	)%			(0.3	)%			(10.1	)%
Permanent differences (i)			(1.1	)%			(1.8	)%			(3.5	)%
Change in valuation allowance			(1.5	)%			(2.3	)%			(1.6	)%
Effect of Super Deduction available to the Group			2.0	%			1.8	%			4.9	%
Effective income tax rate			(15.7	)%			(14.4	)%			(18.8	)%
Per ADS effect of tax holiday (RMB)			3.52				4.71				5.35
Per share effect of tax holiday (RMB)			0.18				0.24				0.27

(i) Permanent differences mainly arise from expenses not deductible for tax purposes including primarily share-based compensation costs and expenses incurred by subsidiaries and VIEs.

Schedule of the tax effects of temporary differences that give rise to the deferred tax asset balances

The tax effects of temporary differences that give rise to the deferred tax asset balances as of December 31, 2017 and 2018 are as follows:

		December 31,
		2017				2018
		RMB				RMB
Deferred tax assets:
Tax loss carried forward			74,951				148,899
Allowance for doubtful receivable, accrued expense and others not currently deductible for tax purposes			62,177				84,249
Deferred revenue			97,858				36,007
Impairment of investment			12,783				17,180
Others			753				753
Valuation allowance (i)			(135,505	)			(175,793	)
Amounts offset by deferred tax liabilities			-				(40,461	)
Total deferred tax assets, net			113,017				70,834
Deferred tax liabilities:
Related to the fair value changes of investments			3,627				61,658
Related to acquired intangible assets			2,406				1,531
Others			4,777				4,777
Amounts offset by deferred tax assets			-				(40,461	)
Total deferred tax liabilities, net			10,810				27,505

(i) Valuation allowance is provided against deferred tax assets when the Group determines that it is more likely than not that the deferred tax assets will not be utilized in the future. In making such determination, the Group considered factors including future taxable income exclusive of reversing temporary differences and tax loss carry forwards. Valuation allowance was provided for net operating loss carry forward because it was more likely than not that such deferred tax assets would not be realized based on the Group’s estimate of its future taxable income. If events occur in the future that allow the Group to realize more of its deferred income tax than the presently recorded amounts, an adjustment to the valuation allowances will result in a decrease in tax expense when those events occur.

Summary of Valuation Allowance

Movement of valuation allowance

		For the year ended December 31,
		2016				2017				2018
		RMB				RMB				RMB
Balance at beginning of the year			(53,316	)			(80,712	)			(135,505	)
Additions			(45,491	)			(78,978	)			(113,597	)
Reversals			18,095				24,185				73,309
Balance at end of the year			(80,712	)			(135,505	)			(175,793	)

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Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

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Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.

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Tabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.

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Tabular disclosure of valuation allowances to reduce deferred tax assets to net realizable value, including identification of the deferred tax asset more likely than not will not be fully realized and the corresponding amount of the valuation allowance.

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