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INCOME TAX
 12 Months Ended
Dec. 31, 2023
INCOME TAX  
INCOME TAX

17. INCOME TAX

a)    Income tax

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

No stamp duty is payable in respect of the issue of the shares or on an instrument of transfer in respect of a share.

United States

Under the current U.S. federal corporate income tax, the Company’s subsidiary in United States are subject to 21% income tax on its taxable income generated from operations in United States. The company’s subsidiaries have no taxable income for all periods presented.

British Virgin Islands

Under the current laws of the British Virgin Islands (“B.V.I.”), entities incorporated in the B.V.I. are not subject to tax on their income or capital gains.

Indonesia

Under the current laws of the Republic of Indonesia, the Company’s subsidiaries in Indonesia are subject to 25% income tax on its taxable income generated from operations in Indonesia.

Hong Kong

Under the Hong Kong tax laws, subsidiaries in Hong Kong are subject to the Hong Kong profits tax rate at 16.5% and they are exempted from income tax on their foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends. A two-tiered profits tax rates regime was introduced in 2018 where the first HK$2 million of assessable profits earned by a company will be taxed at half of the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at  16.5%. There is an anti-fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong for any of the periods presented.

PRC

The Group’s mainland China subsidiaries, the VIE, and VIE’s subsidiaries are subject to the PRC Corporate Income Tax Law (“CIT Law”), and are generally subject to a statutory income tax rate of 25%. Under the CIT Law, preferential tax treatments will be granted to entities which conduct businesses in certain encouraged sectors and to entities otherwise classified as “High and New Technology Enterprises” (“HNTE”). Jiangsu Xiaoniu and Beijing Niudian were qualified as HNTEs and enjoy a preferential income tax rate of 15% for the fiscal years from 2021 to 2023 and 2022 to 2024, respectively. An entity could re-apply for the HNTE certificate when the prior certificate expires. The foregoing preferential income tax rates, however, are subject to periodic review and renewal by PRC authorities.

The CIT 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 CIT Law 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, property, 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 the PRC should be considered a resident enterprise for PRC tax purposes.

The components of income (loss) before income taxes are as follows:

​

​

​

​

​

​

​

​

​

​

For the Year Ended

​

​

December 31, 

​

    

2021

    

2022

    

2023

​

​

RMB

​

RMB

​

RMB

Cayman

 

(9,397,404)

 

(10,448,513)

 

(1,192,264)

Indonesia

​

(881,810)

​

(984,230)

​

(1,268,462)

Hong Kong S.A.R.

 

(6,700,069)

 

(14,613,793)

 

(7,930,644)

B.V.I.

​

—

​

(278,774)

​

(48,100)

Others

​

—

​

—

​

(840,681)

PRC, excluding Hong Kong S.A.R.

 

289,836,300

 

(44,894,563)

 

(270,748,715)

Total

 

272,857,017

 

(71,219,873)

 

(282,028,866)

​

Income tax expense (benefit) consists of the following:

​

​

​

​

​

​

​

​

​

​

For the Year Ended December 31, 

​

​

2021

​

2022

​

2023

​

    

RMB

    

RMB

    

RMB

Current income tax expense (benefit)

 

42,715,007

 

(15,677,411)

 

759,425

Deferred income tax expense (benefit)

 

4,321,601

 

(6,079,533)

 

(10,952,309)

Total

 

47,036,608

 

(21,756,944)

 

(10,192,884)

​

Withholding tax on undistributed dividends

The CIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign investment enterprise (“FIE”) 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 is 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, dividends paid by an FIE 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 FIE). The Group plans to indefinitely reinvest the undistributed earnings of the Group’s PRC entities, and therefore, no provision for PRC dividend withholding tax was accrued.

Reconciliation of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for the years ended December 31, 2021, 2022 and 2023 are as follows:

​

​

​

​

​

​

​

​

​

 

For the Year Ended

​

 

December 31, 

​

​

2021

    

2022

    

2023

​

    

RMB

​

RMB

 

RMB

Computed expected income tax expense (benefit)

 

68,214,254

​

(17,804,968)

​

(71,077,803)

Non-PRC entities not subject to income tax

 

4,244,821

​

6,581,327

​

2,820,038

Research and development expenses bonus deduction

 

(23,328,287)

​

(34,910,421)

​

(30,807,283)

Non-deductible share-based compensation expenses

 

11,015,406

​

13,866,734

​

11,742,974

Other non-deductible expenses

 

723,768

​

638,898

​

2,491,593

Preferential tax rate difference

 

—

​

(3,075,033)

​

7,301,540

Tax filing differences

​

2,682,378

​

(3,770,720)

​

229,108

Change in valuation allowance

​

(16,515,732)

​

16,717,239

​

67,106,949

​

​

​

​

​

​

​

Actual income tax expense (benefit)

 

47,036,608

​

(21,756,944)

​

(10,192,884)

Effect of preferential tax rates on basic earnings per Class A and Class B ordinary share

​

—

​

0.02

​

(0.05)

Effect of preferential tax rates on diluted earnings per Class A and Class B ordinary share

​

—

​

0.02

​

(0.05)

​

b)    Deferred income tax assets and deferred income tax liabilities

​

​

​

​

​

​

​

 

As of December 31, 

​

    

2022

    

2023

​

    

RMB

    

RMB

Deferred income tax assets

​

​

​

​

Net operating loss carry forwards

 

33,325,461

 

74,876,303

Accrued warranty

 

5,071,844

 

3,798,876

Advertising expense

​

—

​

2,113,991

Deferred revenue

 

8,470,357

 

8,938,710

Allowance for doubtful accounts

 

7,037,684

 

41,878,340

Lease Liabilities

​

3,334,705

​

1,099,451

Write-downs for inventories

 

825,208

 

4,529,042

Less: Valuation allowance

 

(40,764,285)

 

(107,782,306)

​

​

​

​

​

Total deferred income tax assets, net

​

17,300,974

​

29,452,407

​

​

​

​

​

Deferred income tax liabilities

​

​

​

​

Operating lease right of use assets

​

3,334,705

​

1,099,451

Short-term investments

​

60,946

​

—

Property, plant and equipment

​

9,171,103

​

9,968,429

​

​

​

​

​

Total deferred income tax liabilities

​

12,566,754

​

11,067,880

​

​

​

​

​

Net deferred income tax assets

​

6,132,499

​

20,747,021

Net deferred income tax liabilities

​

1,398,279

​

2,362,494

​

As of December 31, 2023, the Group had net operating loss carry forwards of RMB334,224,635 attributable to the PRC subsidiaries, the VIE and VIE’s subsidiaries. Tax losses of nil, RMB29,986,636, RMB21,713,526, RMB75,298,399 and RMB207,226,074 will expire, if unused, by 2024, 2025, 2026, 2027 and 2028, respectively.

A valuation allowance is provided against deferred income tax assets when the Group determines that it is more likely than not that some portion or all of the deferred income tax assets will not be utilized in the foreseeable future. The valuation allowance as of December 31, 2022 and 2023 was primarily provided for the deferred income tax assets of certain PRC subsidiaries, VIE and VIE’s subsidiaries. In making such determination, the Group evaluates a variety of factors including the Group’s operating history, accumulated deficit, existence of taxable temporary differences and reversal periods. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or utilizable. Management considers projected future taxable income and tax planning strategies in making this assessment.

Changes in valuation allowance are as follows:

​

​

​

​

​

​

​

​

​

 

For the Year Ended

​

 

December 31, 

​

​

2021

    

2022

    

2023

​

    

RMB

​

RMB

    

RMB

Balance at the beginning of the year

 

41,219,052

 

24,508,473

 

40,764,285

Additions

 

5,567,822

 

25,114,239

 

68,593,841

Reduction

​

(22,278,401)

​

(8,858,427)

​

(1,575,820)

​

​

​

​

​

​

​

Balance at the end of the year

 

24,508,473

 

40,764,285

 

107,782,306

​

According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. The income tax returns of the Company’s PRC subsidiaries, consolidated VIE and VIE’s subsidiaries for the years from 2019 to 2023 are open to examination by the PRC tax authorities.