Income tax expense

12 Months Ended

Dec. 31, 2024

Major components of tax expense (income) [abstract]

The major components of income tax expense for the years ended December 31, 2022, 2023 and 2024 are as follows:


	31.12.2022			31.12.2023			31.12.2024		31.12.2024
	RMB’000			RMB’000			RMB’000		US$’000
Current income tax
- Current year		61,374			66,493			77,923		10,862
- Under provision in respect of prior years		27,406			27,837			151		21
Deferred tax
- Movement in temporary differences		(41,147	)		(14,837	)		17,384		2,423
- (Over)/under provision in respect of prior years		(103	)		54,131			17,675		2,464
Withholding tax
- Income tax expense recognized in profit or loss		11,535			14,872			15,665		2,184
Consolidated income tax expense reported in the statement of profit or loss		59,065			148,496			128,798		17,954

The reconciliation between tax expense and the product of accounting profit multiplied by the PRC income tax rate of 15% (being tax rate of Yuchai) for the years ended December 31, 2022, 2023 and 2024 for the following reasons:


	31.12.2022			31.12.2023			31.12.2024			31.12.2024
	RMB’000			RMB’000			RMB’000			US$’000
Profit before tax		394,726			571,352			620,540			86,501
Income tax expense at 15%		59,209			85,703			93,081			12,975
Adjustments:
Non-deductible expenses		7,924			5,888			7,807			1,088
Tax-exempt income		(500	)		(11,993	)		(16,087	)		(2,242	)
Utilization of deferred tax benefits previously not recognized		(3,093	)		(6,211	)		(8,077	)		(1,126	)
Recognition of deferred tax benefits not previously recognized		—			—			(3,458	)		(482	)
Write off deferred tax benefits previously recognized		—			—			105,682			14,732
Deferred tax benefits not recognized		22,606			42,830			72,680			10,131
Tax credits for research and development expense		(76,835	)		(85,372	)		(114,006	)		(15,892	)
Tax rate differential		10,901			21,542			(42,633	)		(5,943	)
Under provision in respect of previous years		27,303			81,968			17,826			2,485
Withholding tax expense		11,535			14,872			15,665			2,184
Others		15			(731	)		318			44
Total		59,065			148,496			128,798			17,954

Income tax expense (cont’d)

Global minimum top-up tax

The Group has applied a temporary mandatory relief from deferred tax accounting for the impact of the top-up tax and accounts for it as a current tax when it is incurred. Malaysia, Singapore, Thailand, Hong Kong and Germany had enacted new legislation to implement the global minimum top-up tax. The Group does not expect Pillar Two top up exposure arising from the operations in these countries for financial year 2024.

Deferred tax

Deferred tax relates to the following:


	Consolidated statement of financial position									Consolidated statement of profit or loss
	31.12.2023			31.12.2024			31.12.2024			31.12.2022			31.12.2023			31.12.2024			31.12.2024
	RMB’000			RMB’000			US$’000			RMB’000			RMB’000			RMB’000			US$’000
Accelerated tax depreciation		(77,806	)		(34,108	)		(4,755	)		16,472			44,492			43,698			6,091
Interest receivable		—			—			—			363			3,033			—			—
PRC withholding tax on dividend income (i)		(64,717	)		(64,717	)		(9,021	)		(11,458	)		(14,457	)		(15,541	)		(2,166	)
Effect of change in residual value and impairment of property, plant and equipment		2,866			724			101			4,273			(66,774	)		(2,142	)		(299	)
Write-down of inventories		37,120			38,632			5,385			9,253			7,617			1,512			211
Impairment losses on trade receivables		7,426			32,540			4,536			282			355			25,114			3,501
Accruals		232,048			166,623			23,227			(48,841	)		(2,505	)		(65,540	)		(9,120	)
Deferred income		79,896			126,107			17,579			(41,348	)		23,416			46,211			6,442
Losses available for offsetting against future taxable income		112,601			—			—			116,675			(27,146	)		(112,601	)		(15,696	)
Others		31,854			79,871			11,134			(4,421	)		(7,325	)		44,230			6,149
Deferred tax benefits/(expenses)											41,250			(39,294	)		(35,059	)		(4,887	)
Net deferred tax assets		361,288			345,672			48,186
Reflected in the consolidated statement of financial position as follows:
Deferred tax assets		426,377			410,728			57,254
Deferred tax liabilities		(65,089	)		(65,056	)		(9,068	)
		361,288			345,672			48,186

Note:

(i)

The movement of PRC withholding tax on dividend income is as follows:


	31.12.2023			31.12.2024			31.12.2024
	RMB’000			RMB’000			US$’000
At January 1		(61,825	)		(64,717	)		(9,021	)
Provision made to consolidated statement of profit or loss		(14,457	)		(15,541	)		(2,166	)
Utilization		11,565			15,541			2,166
December 31		(64,717	)		(64,717	)		(9,021	)

The Corporate Income Tax (“CIT”) law provides for a tax of 10% to be withheld from dividends paid to foreign investors of PRC enterprises. This withholding tax provision does not apply to dividends paid out of profit earned prior to January 1, 2008. Beginning on January 1, 2008, a 10% withholding tax is imposed on dividends paid to the Company, as a non-resident enterprise, unless an applicable tax treaty provides for a lower tax rate. The Company recognizes a deferred tax liability for withholding tax payable for profits accumulated after December 31, 2007 for the earnings that the Company does not plan to indefinitely reinvest in the PRC enterprises. As of December 31, 2024, the deferred tax liability for withholding tax payable was RMB 64.7 million (US$9.0 million) (2023: RMB 64.7 million). The amount of unrecognized deferred tax liability relating to undistributed earnings of the PRC enterprises is estimated to be RMB 227.2 million (US$31.7 million) (2023: RMB 204.7 million).

Income tax expense (cont’d)

Deferred tax (cont’d)

Deferred tax assets have not been recognized in respect of the following items:


	31.12.2023		31.12.2024		31.12.2024
	RMB’000		RMB’000		US$’000
Unutilized tax losses		628,534		1,681,991		234,463
Unutilized capital allowances and investment allowances		94,447		95,697		13,340
Other unrecognized temporary differences relating to asset impairment and deferred grants		156,226		166,552		23,217
		879,207		1,944,240		271,020

Unrecognized tax losses for the Group are subject to agreement with the tax authorities and compliance with tax regulations in the respective countries in which the Group operates. The unutilized tax losses for PRC subsidiaries and Malaysia subsidiaries expire within the next 5 to 10 years and 10 years, respectively. These losses may not be used to offset taxable income elsewhere in the Group. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profits will be available against which the Group can utilize the benefits.