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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
14
INCOME TAXES
Cayman Islands
Under the current tax laws of the Cayman Islands, the Company is 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.
United States
As a result of the United States tax law amendments, the federal statutory income tax rate for the subsidiary in the US was 21% for the year ended December 31, 2024. Burning Rock Dx LLC operated its business in the states of California, Maryland, New Jersey and Colorado, and was also subject to state income tax at rates of approximately 8.84%, 8.25%, 6.5% and 4.4%, respectively, for the year ended December 31, 2024.
Hong Kong
BR Hong Kong Limited is incorporated in Hong Kong and is subject to Hong Kong profits tax of 16.5% on its activities conducted in Hong Kong.
PRC
The Company’s subsidiaries, VIE and subsidiaries of the VIE domiciled in the PRC are subject to the statutory rate of 25%, in accordance with the Enterprise Income Tax law (the ‘‘EIT Law’’), which was effective since January 1, 2008 except for the following entity which is eligible for a preferential tax rate.
Guangzhou Burning Rock Dx Co., Ltd. was recognized as a qualified HNTE under the EIT Law by the relevant government authorities in December 2022 and is subject to a preferential rate of 15% for three years from 2022 to 2024.
Dividends, interests, rent or royalties payable by the Company’s PRC subsidiaries, to
non-PRC
resident enterprises, and proceeds from any such
non-resident
enterprise investor’s disposition of assets (after deducting the net value of such assets) shall be subject to 10% withholding tax, unless the respective
non-PRC
resident enterprise’s jurisdiction of incorporation has a tax treaty or arrangements with China that provides for a reduced withholding tax rate or an exemption from withholding tax.
The Group’s loss before income tax consists of:
 
    
For the years ended December 31,
  
    
2022
     
2023
     
2024
  
    
RMB
     
RMB
     
RMB
     
US$
  
PRC
      (892,612 )       (604,997 )       (305,469 )       (41,850 ) 
Non-PRC
      (76,636 )       (46,304 )       (35,272 )       (4,833 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
Total loss before income tax
      (969,248 )       (651,301 )       (340,741 )       (46,683 ) 
  
 
 
     
 
 
     
 
 
     
 
 
  
 
 
The current and deferred components of the income tax expenses are as follows:
 
    
For the years ended December 31,
  
    
2022
     
2023
     
2024
  
    
RMB
     
RMB
     
RMB
     
US$
  
Current income tax expenses
      1,985        2,388        5,885        806  
Deferred income tax expenses
      —         —         —         —   
  
 
 
     
 
 
     
 
 
     
 
 
  
Total income tax expenses
      1,985        2,388        5,885        806  
  
 
 
     
 
 
     
 
 
     
 
 
  
Reconciliation between the income tax expenses computed by applying the statutory tax rate to loss before income tax and the actual provision for income tax is as follows:
 
    
For the years ended December 31,
  
    
2022
    
2023
    
2024
  
    
RMB
    
RMB
    
RMB
    
US$
  
Loss before income tax
      (969,248 )      (651,301 )      (340,741 )      (46,683 ) 
PRC statutory income tax rate
      25 %      25 %      25 %      25 % 
Income tax at statutory tax rate
      (242,312 )      (162,825 )      (85,185 )      (11,671 )
Effect of different tax rates
      3,391       (439 )      355       49  
Effect of PRC preferential tax rates
      1,102       10,258       530       73  
Research and development super-deduction
      (13,376 )      (21,812 )      (15,814 )      (2,167 ) 
Non-deductible
expenses
      66,254       69,646       38,398       5,261  
Non-taxable
income
      (575 )      (1,807 )      (1,776 )      (243 ) 
Expiration of tax attributes
      6,540       12,421       14,327       1,963  
Deferred only adjustment
      —        (3,083 )      (1,367 )     (188 )
Transfer pricing adjustment
      7,342       12,011       3,460       474  
Interest and penalty
      —        219       783       107  
Tax rate change
      1,102       (13,453 )      (431 )     (59 ) 
Provision to return
      (120 )      2,722       (7,900
)
     (1,082 )
Changes in valuation allowance
      172,637       98,530       60,505       8,289  
  
 
 
    
 
 
    
 
 
    
 
 
  
Income tax expenses
      1,985       2,388       5,885       806  
  
 
 
    
 
 
    
 
 
    
 
 
  
 
The principal components of the deferred tax assets and liabilities are as follows:
 
    
As of December 31,
  
    
2023
     
2024
  
    
RMB
     
RMB
     
US$
  
Deferred tax assets:
         
Accruals and reserves
      34,972        35,942        4,924  
Net operating loss carried forward
      217,850        228,450        31,298  
Depreciation and amortization
      476        1,460        200  
Excessive education fee
      556        521        71  
Capitalized research and development expense
      20,513        20,048        2,747  
Research and development expense recognition
      258,008        295,499        40,483  
Deferred revenue recognition
      775        1,993        273  
Excessive donation expense carried forward
      1,881        1,943        266  
Impairment loss on fixed asset and intangible asset
      —         8,884        1,216  
Operating lease liabilities
      3,113        13,195        1,808  
Fair value change on financial assets
      —         1,330        182  
  
 
 
     
 
 
     
 
 
  
Gross deferred tax assets
      538,144        609,265        83,468  
  
 
 
     
 
 
     
 
 
  
Less: Valuation allowance
      (535,363 )       (595,868 )
 
      (81,633 )
 
  
 
 
     
 
 
     
 
 
  
Total deferred tax assets
      2,781        13,397        1,835  
  
 
 
     
 
 
     
 
 
  
Deferred tax liabilities:
         
Operating
right-of-use
assets
      (2,781 )       (13,397 )      (1,835 )
  
 
 
     
 
 
     
 
 
  
Total deferred tax liabilities
      (2,781 )       (13,397 )      (1,835 )
  
 
 
     
 
 
     
 
 
  
Net deferred tax assets
      —         —         —   
  
 
 
     
 
 
     
 
 
  
The Company operates through its subsidiaries, VIE and subsidiaries of the VIE and valuation allowance is considered on an individual entity basis. The Company recorded full valuation allowance against deferred tax assets of those entities that were in a three-year cumulative financial loss and are not forecasting profits in the near future as of December 31, 2023 and 2024. In making such determination, the Company also evaluated a variety of factors including the Company’s operating history, accumulated deficit, existence of taxable temporary differences and reversal periods.
As of December 31, 2023 and 2024, the Group had net operating losses of RMB870,943 and RMB885,130 (US$121,262
)
, respectively, from its PRC subsidiaries and US subsidiary. The tax losses in the PRC can be carried forward for five years to offset future taxable income, and the period is extended to ten years for entities that qualify as a HNTE. The Company’s net operating losses from PRC subsidiaries are estimated to expire beginning 2025, and the net operating losses from United States subsidiary can be carried forward with no expiration date.
 
 
As of December 31, 2024, the Company intends to permanently reinvest the undistributed earnings from foreign subsidiaries to fund future operations. As of December 31, 2024, the total amount of undistributed earnings from its PRC subsidiaries as well as VIE is nil. The total undistributed earnings of the Company’s Hong Kong subsidiary is RMB40,752 (US$5,583). The amount of unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries is not determined because such a determination is not practicable.
Unrecognized tax benefits
As of December 31, 2023 and 2024, the Company recorded an unrecognized tax benefits of RMB19,353 and RMB11,338 (US$1,553), respectively, of which RMB4,070 and RMB9,172 (US$1,257) are presented on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balance sheets. It is possible that the amount of uncertain tax position will change in the next twelve months; however, an estimate of the range of the possible outcomes cannot be made at this moment. As of December 31, 2024, unrecognized tax benefits of RMB11,338 (US$1,553), if ultimately recognized, will impact the effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefit was as follows:
 
    
For the years ended December 31,
  
    
2023
     
2024
  
    
RMB
     
RMB
     
US$
  
Balance at beginning of the year
      7,342        19,353        2,651  
Additions
      12,011        —         —   
Decreases
      —         (8,015 )       (1,098 ) 
  
 
 
     
 
 
     
 
 
  
Balance at end of the year
   
 
19,353
 
   
 
11,338
 
   
 
1,553
 
  
 
 
     
 
 
     
 
 
  
The Company records interest and penalties as part of its income tax expense. For the year ended December 31, 2024, the Company recorded RMB783 (US$107) of interest expense in relation to the unrecognized tax benefit into income tax expense. The accumulated interest expense accrued in relation to the unrecognized tax benefit is RMB1,002 (US$137) as of December 31, 2024.
In general, the PRC tax authorities have up to five years to conduct examinations of the tax filings of the Company’s PRC subsidiaries, the VIE and the VIE’s subsidiaries. Accordingly, the PRC tax filings from 2019 through 2024 remain open to examination by the respective tax authorities. The Group may also be subject to examinations of tax filings in other jurisdictions, which are not material to the consolidated financial statements.