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Taxation (Tables)

12 Months Ended

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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