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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Taxes |
Income Taxes | 9. Income Taxes The Company is registered in the Cayman Islands and mainly operates in two taxable jurisdictions—the PRC and Hong Kong. The Group’s income before income taxes is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31, |
​ |  | 2021 |  | 2022 |  | 2023 |
​ | ​ | (In US$ thousands, except percentage) |
Loss from non-China operations | ​ | $ | (232,830) | ​ | $ | (422,860) | ​ | $ | (145,244) | ​
Income from China operations | ​ | ​ | 783,548 | ​ | ​ | 550,946 | ​ | ​ | 648,026 | ​
Total income before income tax expenses | ​ | $ | 550,718 | ​ | $ | 128,086 | ​ | $ | 502,782 | ​
Income tax expense (benefits) applicable to non-China operations | ​ | $ | 1,355 | ​ | $ | (14,176) | ​ | $ | 45,441 | ​
Income tax expense applicable to China operations | ​ | ​ | 137,486 | ​ | ​ | 44,453 | ​ | ​ | 99,846 | ​
Total income tax expenses | ​ | $ | 138,841 | ​ | $ | 30,277 | ​ | $ | 145,287 | ​
Effective tax rate for China operations | ​ | ​ | 17.5 | % | ​ | 8.1 | % | ​ | 15.4 | %
Effective tax rate for the Group | ​ | ​ | 25.2 | % | ​ | 23.6 | % | ​ | 28.9 | %
​ The Group generated the majority of its operating income from PRC operations and has recorded income tax provision for the periods presented. The Group’s loss from non-China operations primarily included stock-based compensation, fair value changes through earnings on investments, investment-related impairment and interest expenses recorded by the Group’s non-China entities. The substantial majority of these items were recognized by the Group’s non-China entities in the Cayman Islands. The Group’s non-China operations have reversed US$14.2 million deferred tax charges which were previously recognized from fair value change of investments in 2022 and recognized US$43.7 million withholding tax in connection with the dividends paid and to be paid by Weibo Technology to Weibo HK in the foreseeable future in 2023. Cayman Islands Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax is required. Hong Kong Weibo HK is subject to 16.5% Hong Kong profit tax on its taxable income generated from operations in Hong Kong. Commencing from the year of assessment 2018/2019, the first HK$2 million of profits earned by entities incorporated in Hong Kong will be taxed at half the current tax rate (i.e., 8.25%) while the remaining profits will continue to be taxed at the existing 16.5% tax rate. Hong Kong does not impose a withholding tax on dividends. As of December 31, 2023, Weibo HK had a net operating loss of US$2.4 million, which can be carried forward indefinitely to offset future taxable income. ​ 9. Income Taxes (Continued) China Effective January 1, 2008, the Enterprise Income Tax Law (the “EIT Law”) in China unifies the enterprise income tax rate for the entities incorporated in China at 25%, unless they are eligible for preferential tax treatment. Preferential tax treatments will be granted to companies conducting businesses in certain encouraged sectors and to entities qualified as “software enterprise”, “key software enterprise” (“KSE”) and/or “high and new technology enterprise” (“HNTE”). Weibo Technology, the Group’s WFOE, was granted the HNTE status for the fiscal years from 2017 to 2023, which entitled the qualified entity a preferential tax rate of 15% in 2021, 2022 and 2023. Its qualification as a HNTE is subject to annual evaluation and a three-year review by the relevant authorities in China. Upon the expiration of qualification, re-accreditation of certification from the relevant authorities is necessary for Weibo Technology to continue enjoying the preferential tax treatment. In addition, certain of the Group’s other PRC entities are also qualified as a “software enterprise”, and/or HNTE, and currently enjoy the respective preferential tax treatments. According to the relevant laws and regulations in the PRC, enterprises engaging in research and development activities were entitled to claim 150% of their research and development expenses incurred as tax deductible expenses when determining their assessable profits for that year (the “R&D Deduction”). The State Taxation Administration of the PRC (“STA”) announced in September 2018 that enterprises engaging in research and development activities would be entitled to claim 175% of their research and development expenses as R&D Deduction from January 1, 2018 to December 31, 2020. The deadline for enjoying this preferential R&D deduction policy was extended to December 31, 2023 as announced in March 2021 by STA. In March 2023, the STA announced that enterprises engaging in research and development activities would be entitled to claim 200% of their research and development expenses as R&D Deduction since January 1, 2023. The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts and circumstances, the Group does not believe that it is likely that its operations outside of the PRC be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, should Weibo be treated as a resident enterprise for PRC tax purposes, the Company will be subject to PRC tax on worldwide income at a uniform tax rate of 25%. The EIT Law also imposes a withholding income tax rate of 10% on dividends distributed by a WFOE to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where the Company incorporated, does not have such tax treaty with China. According to the arrangement between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006 and subsequent amendments, dividends paid by a WFOE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of the WFOE). The operations of the Group’s WFOE in China are invested and held by Weibo HK. If the Company is regarded as a PRC non-resident enterprise and Weibo HK is regarded as a PRC resident enterprise, Weibo HK may be required to pay a 10% withholding tax on any dividends payable to the Company. Under such circumstances, if Weibo HK is deemed to be a “PRC resident enterprise”, the dividends distributed from Weibo Technology to Weibo HK is not subject to dividend withholding tax. Also, Weibo HK would be subject to PRC enterprise income tax on at a rate of 25%. If the Company and Weibo HK is regarded as a PRC non-resident enterprise and subject to specific conditions, Weibo Technology may be allowed to pay a 5% withholding tax for any dividends payable to Weibo HK. For the year ended December 31, 2023, Weibo HK received special cash dividend of US$406.1 million from Weibo Technology, the WFOE, and withholding tax of US$20.5 million in connection with the dividend was fully paid. Except for the withholding tax paid in 2023, Weibo HK accrued additional withholding tax of US$23.1 million on retained earnings generated in 2023 by Weibo Technology, because Weibo Technology’s earnings are to be remitted to Weibo HK in the foreseeable future to fund its demand on US dollars in business operations, payments of dividends and debts, potential investments, etc. As of December 31, 2022 and December 31, 2023, the Group had a total undistributed PRC earnings of RMB 22.4 billion and RMB 19.9 billion, respectively, which are expected to be indefinitely reinvested in the Group’s business for the foreseeable future. 9. Income Taxes (Continued) Composition of income tax expenses The following table sets forth current and deferred portion of income tax expenses of the Group: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31,
​ |  | 2021 |  | 2022 |  | 2023
​ | ​ | ​ | (In US$ thousands)
Current income tax expenses | ​ | $ | 151,319 |  | $ | 55,098 |  | $ | 121,249
Deferred tax expenses (benefits) | ​ | ​ | (12,478) | ​ | ​ | (24,821) | ​ | ​ | 24,038
Income tax expenses | ​ | $ | 138,841 |  | $ | 30,277 |  | $ | 145,287
​ Reconciliation of the statutory tax rate to the effective tax rate The following table sets forth reconciliation between the PRC statutory EIT rate of 25% and the effective tax rate for the Group: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31, |
​ |  | 2021 |  | 2022 |  | 2023 |
PRC Statutory EIT rate(1) |  | 25.0 | % | 25.0 | % | 25.0 | %
Effect on tax holiday and preferential tax treatment | ​ | (13.1) | % | (29.7) | % | (9.5) | %
Research and development super-deduction |  | (7.5) | % | (21.1) | % | (4.4) | %
Non-deductible expenses and non-taxable income and others (2) | ​ | 9.2 | % | (30.1) | % | (3.5) | %
Change in valuation allowance | ​ | 0.7 | % | 8.2 | % | 5.0 | %
Effect of PRC withholding tax | ​ | — | ​ | — | ​ | 8.7 | %
Tax rate difference from statutory rate in other jurisdictions |  | 10.9 | % | 71.3 | % | 7.6 | %
Effective tax rate for the Group |  | 25.2 | % | 23.6 | % | 28.9 | %
(1) | The PRC statutory income tax rate is used for the reconciliation as the majority of the Group’s operations are based in the PRC.
(2) | The item included the impact of uncertain tax positions recognized in 2021 and the reversal of uncertain tax positions in 2022.
The provision for income taxes for China operations for the years ended December 31, 2021, 2022 and 2023 differs from the amounts computed by applying the statutory EIT rate primarily due to the preferential tax treatments described above enjoyed by the WFOE, Weibo Technology, during the periods presented. Weibo Technology enjoyed a tax reduction of US$55.1 million, US$26.9 million and US$42.2 million for the HNTE status in 2021, 2022 and 2023, respectively. The WFOE recognized tax benefits of research and development super deduction of US$41.4 million, US$26.9 million and US$22.2 million in 2021, 2022 and 2023, respectively. If the Group assessed that the benefits were more-likely-than-not to be sustained in the corresponding year, it would accordingly recognize the tax benefits. The preferential tax treatments benefited by the Group during the three-year period ended December 31, 2023 amounting to US$72.3 million, US$37.9 million and US$48.0 million, resulted in an effect of US$0.32, US$0.16 and US$0.20 on basic net income per share in 2021, 2022 and 2023, respectively. ​ 9. Income Taxes (Continued) Deferred tax assets and liabilities The following table sets forth the significant components of deferred tax assets and liabilities for the Group: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | As of December 31,
​ |  | 2022 |  | 2023
​ | ​ | (In US$ thousands)
Deferred tax assets: | ​ | ​ | ​ | ​ | ​ | ​
Net operating loss carry forwards | ​ | $ | 18,289 | ​ | $ | 49,802
Investment-related impairment | ​ | ​ | 52,363 | ​ | ​ | 50,441
Depreciation, accounts receivable, accrued and other liabilities | ​ | ​ | 73,557 | ​ | ​ | 72,207
Valuation allowance | ​ | ​ | (104,220) | ​ | ​ | (129,188)
Net deferred tax assets | ​ | $ | 39,989 | ​ | $ | 43,262
​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Acquired intangible assets | ​ | $ | 27,435 | ​ | $ | 28,528
Depreciation | ​ | ​ | 1,731 | ​ | ​ | 1,769
Unrealized investment-related gain | ​ | ​ | 12,414 | ​ | ​ | 12,282
Withholding tax | ​ | ​ | — | ​ | ​ | 23,365
Others | ​ | ​ | 114 | ​ | ​ | 207
Total deferred tax liabilities | ​ | $ | 41,694 | ​ | $ | 66,151
​ 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 (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary differences and carry forwards; and (iii) tax planning strategies. The valuation allowance on deferred tax assets as of December 31, 2022 and 2023 was US$104.2 million and US$129.2 million, respectively. The valuation allowance primarily relates to credit loss allowances and investment impairment charges, as well as net operating loss carry forwards. Historically, deferred tax assets were valued using the tax rate applicable to each entity for China operations. Net operating loss carry forwards for China operations as of December 31, 2023 will expire, if unused, in the years ending December 31, 2024 through December 31, 2028. ​ Uncertain tax position Except for the lag recognition of preferential tax treatment of research and development super deduction and stock based related deduction, the Group did not record any liability or decrease in deferred tax asset related to uncertain tax positions as of December 31, 2022 and 2023, and thus, no interest and penalties related to uncertain tax positions were recorded. For the year ended December 31, 2021, based on interactions with the tax authorities, the Group received additional guidance regarding certain areas with heightened requirements, and updated its estimate of related tax benefit amount that is expected to be sustained upon settlement with tax authorities. Additional US$27.9 million tax liability related to the uncertain tax positions was recognized for 2021, which is based on the updated estimate of the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement with the tax authorities. For the year ended December 31, 2022, the Group reversed US$21.4 million tax liability related to the uncertain tax positions based on further interactions with the tax authorities. In general, the PRC tax authorities have up to five years to review a company’s tax filings. Accordingly, tax filings of the Company’s PRC subsidiaries and VIEs for tax years 2019 through 2023 remain subject to the review by the relevant PRC tax authorities.

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