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Income tax (Tables)

12 Months Ended

Dec. 31, 2019

Income tax

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,
​	​	2017	​	2018	​	2019
​		RMB		RMB		RMB
​	​	​	​	​	​	​
Income (loss) before income tax expenses
PRC entities		2,919,350		3,494,192		4,265,759
Non-PRC entities		(28,172)		(959,721)		(57,648)
Total		2,891,178		2,534,471		4,208,111
​	​	​	​	​	​	​
Current income tax expenses
PRC entities		(402,012)		(379,130)		(684,086)
Non-PRC entities		(9,880)		(48,931)		(30,565)
Total		(411,892)		(428,061)		(714,651)
​	​	​	​	​	​	​
Deferred income tax benefit (expenses)
PRC entities		(3,919)		(25,081)		63,582
Non-PRC entities		—		(24,565)		104,447
Total		(3,919)		(49,646)		168,029
​	​	​	​	​	​	​
Income tax expenses
PRC entities		(405,931)		(404,211)		(620,504)
Non-PRC entities		(9,880)		(73,496)		73,882
Total		(415,811)		(477,707)		(546,622)

​

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,
​		2017		2018		2019	​
​	​	​	​	​	​	​	​
PRC Statutory income tax rate		(25.0)	%	(25.0)	%	(25.0)	%
Effect of tax holiday and preferential tax benefit		13.2	%	16.5	%	8.9	%
Effect of different tax rates available to different jurisdictions (i)		(0.3)	%	(10.1)	%	10.9	%
Permanent differences (ii)		(1.8)	%	(3.5)	%	(1.3)	%
Change in valuation allowance		(2.3)	%	(1.6)	%	(11.2)	%
Effect of Super Deduction available to the Group		1.8	%	4.9	%	4.7	%
Effective income tax rate		(14.4)	%	(18.8)	%	(13.0)	%
​	​	​	​	​	​	​	​
Per ADS effect of tax holiday (RMB)		4.71		5.35		6.59	​
Per share effect of tax holiday (RMB)		0.24		0.27		0.33	​

(i) The effect of different tax rates available to different jurisdictions was mainly due to the fair value loss on derivative liabilities incurred by Huya whose applicable tax rate is zero for the year ended December 31, 2018. The effect of different tax rates available to different jurisdictions was mainly due to the re-measurement gain of the previously held equity interest in Bigo on the acquisition date incurred by Duowan BVI whose applicable tax rate is zero for the year ended December 31, 2019.

(ii) 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

​

​	​	​	​	​
​	​	December 31,
​	​	2018	​	2019
​		RMB		RMB
​	​	​	​	​
Deferred tax assets:
Tax loss carried forward		148,899		707,744
Allowance for doubtful receivable, accrued expense and others not currently deductible for tax purposes		84,249		173,512
Deferred revenue		36,007		90,959
Impairment of investment		17,180		19,280
Others		753		2,725
Valuation allowance (i)		(175,793)		(722,280)
​	​	​	​	​
Amounts offset by deferred tax liabilities		(40,461)		(144,305)
​	​	​	​	​
Total deferred tax assets, net		70,834		127,635
​	​	​	​	​
Deferred tax liabilities:
Related to the fair value changes of investments		61,658		70,517
Related to acquired intangible assets		1,531		323,466
Others		4,777		14,961
​	​	​	​	​
Amounts offset by deferred tax assets		(40,461)		(144,305)
​	​	​	​	​
Total deferred tax liabilities, net		27,505		264,639

(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,
​	​	2017	​	2018	​	2019
​		RMB		RMB		RMB
​	​	​	​	​	​	​
Balance at beginning of the year		(80,712)		(135,505)		(175,793)
Additions		(78,978)		(113,597)		(585,557)
Reversals		24,185		73,309		39,070
Balance at end of the year		(135,505)		(175,793)		(722,280)

​

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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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