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Income Tax Expenses | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAX EXPENSES |
1 4. | INCOME TAX EXPENSES
Cayman Islands Under the current tax laws of the Cayman Islands, the Company and its subsidiaries are not subject to tax on income or capital gains. Besides, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed. Hong Kong Under the current Hong Kong Inland Revenue Ordinance, the subsidiaries of the Group in Hong Kong are subject to 8.25% and 16.5% Hong Kong profit tax on its taxable income within HKD$2 million and beyond HKD$2 million respectively, generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiary incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax. PRC In accordance with the Enterprise Income Tax Law (“EIT Law”), Foreign Investment Enterprises (“FIEs”) and domestic companies are subject to Enterprise Income Tax (“EIT”) at a uniform rate of 25%. The subsidiaries and VIEs of the Group in the PRC are subject to a uniform income tax rate of 25% for years presented except for the entities which are qualified to certified High and New Technology Enterprises (“HNTE”) that are entitled to a favorable statutory tax rate of 15%. According to a policy promulgated by the State Tax Bureau of the PRC and effective from 2008 onwards, enterprises engaged in research and development activities are entitled to claim an additional tax deduction amounting to 50% of the qualified research and development expenses incurred in determining its tax assessable profits for that year. The additional tax deduction has been increased from 50% of the qualified research and development expenses to 75%, effective from 2018 to 2020, according to a new tax incentives policy promulgated by the State Tax Bureau of the PRC in September 2018. The additional tax deduction has been increased from 75% of the qualified research and development expenses to 100%, effective from 2021, according to a new tax incentives policy promulgated by the State Tax Bureau of the PRC in May 2021(“Super Deduction”). Withholding tax on undistributed dividends Under the CIT Law and its implementation rules, the profits of a foreign-invested enterprise arising in 2008 and thereafter that are distributed to its immediate holding company outside the PRC are subject to withholding tax at a rate of 10%. A lower withholding tax rate will be applied if there is a beneficial tax treaty between the PRC and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be eligible, with approval of the PRC local tax authority, to be subject to a 5% withholding tax rate under the Arrangement Between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital if such holding company is considered to be a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign-invested enterprise distributing the dividends. However, if the Hong Kong holding company is not considered to be the beneficial owner of such dividends under applicable PRC tax regulations, such dividend will remain subject to withholding tax at a rate of 10%. Aggregate undistributed earnings of the Group entities located in the PRC that are available for distribution to the Company as of December 31, 2020 and 2021 are approximately RMB827,531 and RMB956,980, respectively. The Company does not intend to have any of its subsidiaries located in the PRC distribute any undistributed earnings of such subsidiaries in the foreseeable future, but rather expects that such earnings will be reinvested by such subsidiaries for their PRC daily operations. Accordingly, no withholding tax was recorded as of December 31, 2020 and 2021.
1 4. | INCOME TAX EXPENSES (Continued)
Composition of income tax expense The current and deferred components of income taxes appearing in the consolidated statements of comprehensive income are as follows:
|  | Year ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | RMB |  |  | RMB |  |  | RMB |
Current tax expenses |  |  | 52,232 |  |  |  | 44,813 |  |  |  | 26,854 |
Deferred tax benefit |  |  | (7,042 | ) |  |  | (1,492 | ) |  |  | (21,115 | )
Income tax expenses |  |  | 45,190 |  |  |  | 43,321 |  |  |  | 5,739 |
Reconciliation between the income tax expenses computed by applying the PRC enterprise tax rate to income before income taxes and actual provision were as follows:
|  | Year ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | RMB |  |  | RMB |  |  | RMB |
Income from operations in the PRC |  |  | 321,090 |  |  |  | 200,941 |  |  |  | 89,126 |
Income from overseas entities |  |  | 17,930 |  |  |  | 16,826 |  |  |  | 5,504 |
Income before income tax |  |  | 339,020 |  |  |  | 217,767 |  |  |  | 94,630 |
Tax expense at PRC enterprise income tax rate of 25% |  |  | 84,755 |  |  |  | 54,442 |  |  |  | 23,658 |
Income tax on tax holiday(1) |  |  | (31,493 | ) |  |  | (31,074 | ) |  |  | (16,872 | )
Tax effect of permanent differences(2) |  |  | (12,147 | ) |  |  | (16,895 | ) |  |  | (28,303 | )
Change in valuation allowance(3) |  |  | 1,592 |  |  |  | 29,780 |  |  |  | 22,153 |
Effect of share-based compensation |  |  | 6,475 |  |  |  | 10,830 |  |  |  | 7,111 |
Effect of income tax in jurisdictions other than the PRC |  |  | (3,992 | ) |  |  | (3,762 | ) |  |  | (2,008 | )
Income tax expenses |  |  | 45,190 |  |  |  | 43,321 |  |  |  | 5,739 |
| (1) | The income tax on tax holidays represents the effect of preferential income tax rate enjoyed by Foshan Viomi, Guangdong Lizi and Yunmi Hulian. Foshan Viomi was qualified as an HNTE and enjoyed the beneficial tax rate of 15% for the three years ended December 31, 2019, 2020 and 2021. Foshan Viomi will need to re-apply for HNTE qualification renewal in 2022. The Company believed that Foshan Viomi can successfully obtain the renewal in 2022. Guangdong Lizi applied for the HNTE qualification and obtained approval in December 2020. It entitled to enjoy the preferential tax rate of 15% as an HNTE for three years starting from 2020 and should apply for HNTE qualification renewal in 2023. Yunmi Hulian applied for the HNTE qualification and obtained approval in December 2021. It entitled to enjoy the preferential tax rate of 15% as an HNTE for three years starting from 2021 and should apply for HNTE qualification renewal in 2024.
| (2) | The permanent book-tax differences mainly consisted of R&D super deductions.
| (3) | Valuation allowance for the years ended December 31, 2019, 2020 and 2021 are related to the deferred tax assets of certain group entities which reported loss. The Group believed that it is more likely than not that these the deferred tax assets of these entities will not be utilized. Therefore, valuation allowance has been provided.
The per share effect of the tax holidays are as follows:
|  | Year ended December 31,
|  | 2019 |  |  | 2020 |  |  | 2021
|  | RMB |  |  | RMB |  |  | RMB
Net income per share effect – basic |  | 0.13 |  |  | 0.14 |  |  | 0.02
Net income per share effect – diluted |  |  | 0.13 |  |  |  | 0.13 |  |  | 0.02
14. | INCOME TAX EXPENSES (Continued)
Deferred tax assets and deferred tax liabilities The significant components of the Group’s deferred tax assets were as follows:
|  | As of December 31, |
|  | 2020 |  |  | 2021 |
|  | RMB |  |  | RMB |
Accrued expenses and others |  |  | 12,466 |  |  |  | 18,567 |
Net operating loss carry forwards |  |  | 32,985 |  |  |  | 69,852 |
Inventories write downs |  |  | 1,463 |  |  |  | 985 |
Deferred income |  |  | 201 |  |  |  | 161 |
Total deferred tax assets |  |  | 47,115 |  |  |  | 89,565 |
Less: valuation allowance |  |  | (32,926 | ) |  |  | (54,261 | )
Deferred tax assets, net |  |  | 14,189 |  |  |  | 35,304 |
Movement of valuation allowance
|  | Year ended December 31, |
|  | 2019 |  |  | 2020 |  |  | 2021 |
|  | RMB |  |  | RMB |  |  | RMB |
Balance at beginning of the year |  |  | 1,554 |  |  |  | 3,146 |  |  |  | 32,926 |
Provided |  |  | 1,592 |  |  |  | 29,780 |  |  |  | 21,335 |
Balance at end of the year |  |  | 3,146 |  |  |  | 32,926 |  |  |  | 54,261 |
Uncertain tax positions The Group evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2019 and 2020, the Group did not have any significant unrecognized uncertain tax positions. According to the PRC Tax Administration and Collection Law, the statute of limitations is generally three years and can be extended to five years under special circumstances.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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