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Taxation (Tables) | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Components of income before income taxes |
|  | Year ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Income/(loss) before income tax expense |  |  |  |  |  |  |  |  |  |  |  |
Income/(loss) from China operations |  | $ | (89,150 | ) |  | $ | 154,514 |  |  | $ | 153,708 |
Income/(loss) from non-China operations |  |  | 19,079 |  |  |  | (57,815 | ) |  |  | (22,141 | )
Total income/(loss) before income tax expense from continuing operations |  | $ | (70,071 | ) |  | $ | 96,699 |  |  | $ | 131,567 |
Income tax expense applicable to China operations |  |  |  |  |  |  |  |  |  |  |  |
Current tax |  | $ | 9,026 |  |  | $ | 24,255 |  |  | $ | 31,089 |
Deferred tax |  |  | 11,191 |  |  |  | 102,652 |  |  |  | 26,207 |
Subtotal income tax expense applicable to China operations |  |  | 20,217 |  |  |  | 126,907 |  |  |  | 57,296 |
Non-China income tax expense |  |  | 7,887 |  |  |  | 6,207 |  |  |  | 4,817 |
Non-China withholding tax expense |  |  | 324 |  |  |  | 112 |  |  |  | 183 |
Total income tax expense from continuing operations |  | $ | 28,428 |  |  | $ | 133,226 |  |  | $ | 62,296 |
Combined effects of the income tax exemption and reduction available |
|  | Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Tax holiday effect |  | $ | 7,981 |  |  | $ | 16,174 |  |  | $ | 1,635 |
Basic net income per share effect |  |  | 0.20 |  |  |  | 0.41 |  |  |  | 0.04 |
Reconciliation between the U.S. federal statutory rate and the Group's effective tax rate |
|  | Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Statutory Rate: |  |  | 25 | % |  |  | 25 | % |  |  | 25 | %
Effect of tax holidays applicable to subsidiaries and consolidated VIEs (1) |  |  | 11 | % |  |  | (17 | %) |  |  | (1 | %)
Tax differential from statutory rate applicable to subsidiaries and consolidated VIEs |  |  | 7 | % |  |  | 9 | % |  |  | 3 | %
Effect of withholding taxes (2) |  |  | (12 | %) |  |  | 109 | % |  |  | 19 | %
Changes in valuation allowance for deferred tax assets |  |  | (71 | %) |  |  | 27 | % |  |  | 31 | %
Research and development super-deduction |  |  | 12 | % |  |  | (9 | %) |  |  | (19 | %)
Others |  |  | (1 | %) |  |  | (13 | %) |  |  | (14 | %)
|  | (29 | %) |  | 131 | % |  | 44 | %
Note (1): The reversal of income tax for preferential income tax rates that Changyou’s subsidiaries and VIEs were entitled to as KNSEs or Software Enterprises for 2019, 2020 and 2021 was included in the “Effect of tax holidays applicable to subsidiaries and consolidated VIEs” in the above table. Note (2): The revised policy was adopted to facilitate the distribution of a special cash dividend in the aggregate amount of approximately $500.0 million that was declared by Changyou’s board of directors (the “Changyou Board”) on April 5, 2018. The change for 2020 was mainly due to additional income withholding tax of $88 million that was recognized in the second quarter of 2020 due to a revised policy with respect to Changyou’s PRC subsidiaries regarding their distribution of cash dividends.
Deferred tax assets and liabilities | Significant components of the Group’s deferred tax assets and liabilities consist of the following (in thousands):
|  | As of December 31, |
|  | 2020 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss from operations |  | $ | 325,797 |  |  | $ | 291,380 |
Accrued bonus and commissions |  |  | 10,613 |  |  |  | 9,101 |
Intangible assets transfer |  |  | 690 |  |  |  | 485 |
Others |  |  | 8,692 |  |  |  | 7,489 |
Total deferred tax assets |  |  | 345,792 |  |  |  | 308,455 |
Less: Valuation allowance |  |  | (326,755 | ) |  |  | (289,097 | )
Net deferred tax assets |  | $ | 19,037 |  |  | $ | 19,358 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Withholding tax for dividend |  | $ | (206,594 | ) |  | $ | (237,116 | )
Others |  |  | (10,999 | ) |  |  | (12,049 | )
Total deferred tax liabilities |  | $ | (217,593 | ) |  | $ | (249,165 | )
Movement of the valuation allowances | The following table sets forth the movement of the valuation allowances for deferred tax assets for the years presented (in thousands):
|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Beginning balance |  | $ | 250,524 |  |  |  | 283,711 |  |  |  | 326,755 |
Provision for the year |  |  | 44,634 |  |  |  | 36,363 |  |  |  | 45,787 |
Reversal for the year |  |  | (7,311 | ) |  |  | (12,637 | ) |  |  | (91,019 | )
Foreign currency translation adjustment |  |  | (4,136 | ) |  |  | 19,318 |  |  |  | 7,574 |
Ending balance |  | $ | 283,711 |  |  |  | 326,755 |  |  |  | 289,097 |
Uncertain tax positions |
|  | As of December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
Beginning balance |  | $ | 174,363 |  |  | $ | 181,640 |  |  | $ | 188,760 |
Increases/(decreases) related to prior year tax positions |  |  | 7,277 |  |  |  | 7,120 |  |  |  | 5,158 |
Increases related to current year tax positions |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Ending balance |  | $ | 181,640 |  |  | $ | 188,760 |  |  | $ | 193,918 |

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