XML 46 R26.htm IDEA: XBRL DOCUMENT
v3.19.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2018
INCOME TAXES |
INCOME TAXES | 17. INCOME TAXES Cayman Islands The Company is a tax-exempt entity incorporated in Cayman Islands. Hong Kong The Company’s subsidiaries located in Hong Kong and are subject to a profits tax rate of 8.25% on assessable profits on the first Hong Kong Dollars ("HK$") 2 million and 16.5% for any assessable profits in excess of HK$2 million starting from the financial commencing on April 1, 2018. China The Company’s subsidiaries, the VIEs and the VIEs’ subsidiaries and kindergartens, which were entities established in the PRC (the "PRC entities") are subject to PRC Enterprise Income Tax (EIT), on the taxable income in accordance with the relevant PRC income tax laws, which have adopted a unified income tax rate of 25% since January 1, 2008. The current and deferred components of the income tax expense appearing in the consolidated statements of operations are as follows:
|  | Years ended December 31,
|  | 2016 |  | 2017 |  | 2018
Current tax expense |  | 3,842 |  | 9,291 |  | 6,351
Deferred tax expense |  | (1,687) |  | (5,479) |  | (3,892)
|  | 2,155 |  | 3,812 |  | 2,459
The principle components of deferred taxes and deferred tax liabilities are as follows:
|  | Years ended December 31,
|  | 2016 |  | 2017 |  | 2018
Deferred tax assets |  |  |  |  |  |
Accrued expenses |  | 2,918 |  | 3,615 |  | 4,094
Net operating loss carry-forwards |  | 6,306 |  | 11,337 |  | 14,123
Total deferred tax assets |  | 9,224 |  | 14,952 |  | 18,217
Less: valuation allowance |  | (2,273) |  | (2,522) |  | (2,022)
Deferred tax assets, net |  | 6,951 |  | 12,430 |  | 16,195
Deferred tax liabilities |  |  |  |  |  |
Acquired intangible assets, net |  | — |  | — |  | 1,110
Total deferred tax liabilities |  | — |  | — |  | 1,110
As of December 31, 2017 and 2018, the Group had net operating loss carried forward from the PRC entities of $45,348 and $56,492, respectively, which will expire on various dates from December 31, 2019 to December 31, 2023. The reconciliation of the effective tax rate and the statutory income tax rate applicable to PRC operations is as follows:
|  | Years ended December 31,
|  | 2016 |  | 2017 |  | 2018
Income before income taxes |  | 8,231 |  | 10,592 |  | 1,037
Income tax expense computed at an applicable tax rate of 25% |  | 2,058 |  | 2,648 |  | 259
Permanent differences |  | 80 |  | 6 |  | 10
Effect of income tax rate difference in other jurisdictions |  | — |  | 909 |  | 2,690
Change in valuation allowance |  | 17 |  | 249 |  | (500)
|  | 2,155 |  | 3,812 |  | 2,459
In addition, uncertainties exist with respect to how the current income tax law in the PRC applies to the Group’s overall operations, and more specifically, with regard to tax residency status. The New EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents for Chinese Income tax purposes if the place of effective management or control is within the PRC. The implementation rules to the New EIT Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting and properties, occurs within the PRC. Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, the Group does not believe that the legal entities organized outside of the PRC within the Group should be treated as residents for EIT law purposes. If the PRC tax authorities subsequently determine that the Company should be deemed resident enterprises, the Company will be subject to the PRC income taxes, at a rate of 25%. If any entity within the Group that is outside the PRC were to be a non-resident for PRC tax purposes dividends paid to it out of profits earned by PRC subsidiaries after January 1, 2008 would be subject to a withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with the PRC. As of December 31, 2018, the Company's subsidiaries, the VIEs, and VIEs’ subsidiaries and kindergartens located in the PRC recorded aggregate accumulated deficits. Accordingly, no deferred tax liabilities has been accrued for the Chinese dividend withholding taxes. In the future, aggregate undistributed earnings of the Company's subsidiaries, the VIEs, and VIEs’ subsidiaries and kindergartens located in the PRC, if any, that are taxable upon distribution to the Company, will be considered to be indefinitely reinvested, because the Company does not have any plan to pay cash dividends by using any undistributed earnings of the Company's subsidiaries, the VIEs, and VIEs’ subsidiaries and kindergartens located in the PRC in the foreseeable future and intends to retain most of their available funds and any future earnings for use in the operation and expansion of their business. The Group did not identify significant unrecognized tax benefits for the years ended December 31, 2016, 2017 and 2018. The Group did not incur any interest and penalties related to potential underpaid income tax expenses and also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from December 31, 2018.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration