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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Taxes [Abstract] |
Income Taxes | 1 5. Income Taxes Income Tax Expense and Effective Tax Rate The provisions for income tax expense are summarized as follows (in thousands):
|  | For the Years Ended December 31, |
|  | 2014 |  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | RMB |  | US$ |
Current tax expense |  | 51,603 |  | 36,915 |  | 32,433 |  | 4,671 |
Deferred tax benefit |  | (3,226 | ) | (11,398 | ) | (18,344 | ) | (2,642 | )
Income tax expense |  | 48,377 |  | 25,517 |  | 14,089 |  | 2,029 |
The components of income before tax and income tax expense for PRC and non-PRC operations are as follows (in thousands):
|  | For the Years Ended December 31, |
|  | 2014 |  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | RMB |  | US$ |
Income arising from PRC operations |  | 358,667 |  | 159,318 |  | 86,599 |  | 12,473 |
(Loss)/income arising from non-PRC operations |  | (48,171 | ) | (61,416 | ) | 5,710 |  | 821 |
Income before tax |  | 310,496 |  | 97,902 |  | 92,309 |  | 13,294 |
Income tax expense relating to PRC operations |  | 48,281 |  | 25,510 |  | 13,806 |  | 1,988 |
Income tax expense relating to non-PRC operations |  | 96 |  | 7 |  | 283 |  | 41 |
Income tax expense |  | 48,377 |  | 25,517 |  | 14,089 |  | 2,029 |
Effective tax rate for PRC operations |  | 13.5 | % | 16.0 | % | 15.9 | % | 15.9 | %
Cayman Islands (“Cayman”) Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed. British Virgin Islands (“BVI”) The Group is exempted from income tax on its foreign-derived income in the BVI. There are no withholding taxes in the BVI. Hong Kong Entities incorporated in Hong Kong are subject to the tax rate 16.5% on the estimated assessable profit arising in Hong Kong. PRC The PRC Corporate Income Taxes Law (“CIT Law”) generally applies an income tax rate of 25% to all enterprises, but grants preferential tax treatment to High and New Technology Enterprises (“HNTEs”) and Software Enterprises. Under these preferential tax treatments, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years and Software Enterprises are entitled to an income tax exemption for two years beginning with its first profitable year and a 50% reduction to a rate of 12.5% for the subsequent three years. Fenghuang On-line had been qualified as an HNTE in October 2011 and November 2014, respectively, and was entitled to a preferential tax rate of 15%. Therefore, Fenghuang On-line was subject to a 15% income tax rate for the years 2014 to 2016. In 2014, Tianying Jiuzhou resubmitted applications for qualification and was approved as an HNTE. Therefore, Tianying Jiuzhou was subject to a 15% income tax rate from 2014 to 2016. In 2012, Fenghuang Yutian was qualified as a Software Enterprise. As 2013 was the first year Fenghuang Yutian generated taxable profit, it was exempted from income taxes for years 2013 and 2014, and was subject to a 12.5% income tax rate from 2015 to 2017. In 2016, Fenghuang Borui qualified as a Software Enterprise. As 2016 was the first year Fenghuang Borui generated taxable profit, it would be exempted from income taxes for years 2016 and 2017, and subject to a 12.5% income tax rate from 2018 to 2020. All other PRC incorporated entities of the Group were subject to a 25% income tax rate for all the years presented. The CIT Law also provides that an enterprise established under the laws of foreign countries or regions 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. On April 22, 2009, the State Administration of Taxation (“SAT”) issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Under Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. The Company and its offshore subsidiaries had not ever been treated as resident enterprises for PRC tax purposes. Withholding Tax on Undistributed Dividends The CIT Law imposes a 10% withholding income tax on dividends distributed by foreign invested enterprises in the PRC to their immediate holding companies outside the PRC. A lower withholding tax rate may be applied if there is a tax treaty between the PRC and the jurisdiction of the foreign holding company. A holding company in Hong Kong, for example, will be subject to a 5.0% withholding tax rate under an 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 a non-PRC resident enterprise and holds at least 25.0% of the equity interests in the PRC foreign invested enterprise distributing the dividends, subject to approval of the PRC local tax authority. 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 a withholding tax rate of 10%. The PRC subsidiaries, VIEs and subsidiaries of VIEs have not paid dividends in the past and do not have any present plans to declare and pay any dividends on the Company’s ordinary shares or ADSs in the near future and the Group currently intends to retain most, if not all, of its available funds and any future earnings to operate and expand the business. Accordingly, the Company does not intend to have its PRC subsidiaries distribute any undistributed profits of such subsidiaries to their direct overseas parent companies, but rather intends that such profits will be permanently reinvested in such subsidiaries to further expand their business in the PRC. As of December 31, 2016, the Company did not record any withholding tax on the retained earnings of its foreign invested enterprises in the PRC. Aggregate undistributed earnings of the Group’s entities located in the PRC that were available for distribution to the Company as of December 31, 2015 and 2016 were approximately RMB959.7 million and RMB1,030.2 million (US$148.4 million), respectively. The amounts of the unrecognized deferred tax liability on the permanently reinvested earnings were RMB96.0 million and RMB103.0 million (US$14.8 million) as of December 31, 2015 and 2016, respectively. Reconciliation of the Differences between Statutory Tax Rate and the Effective Tax Rate for PRC Operations Reconciliation of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for PRC operations for the years ended December 31, 2014, 2015 and 2016 is as follows (in thousands):
|  | For the Years Ended December 31, |
|  | 2014 |  | 2015 |  | 2016 |
|  | % |  | % |  | % |
Statutory income tax rate |  | 25.0 |  | 25.0 |  | 25.0 |
Permanent differences |  | (1.7 | ) | (2.7 | ) | (9.3 | )
Change in valuation allowance |  | 0.4 |  | (0.9 | ) | 7.8 |
Effect of preferential tax benefits |  | (11.5 | ) | (6.3 | ) | (11.4 | )
Uncertain tax positions |  | 1.3 |  | 0.9 |  | 3.8 |
Effective income tax rate |  | 13.5 |  | 16.0 |  | 15.9 |
The combined effects of the income tax expense exemption and other preferential tax benefits available to the Group are as follows (in thousands, except per share data):
|  | For the Years Ended December 31, |
|  | 2014 |  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | RMB |  | US$ |
Preferential tax rate effect |  | 41,157 |  | 10,073 |  | 9,878 |  | 1,423 |
Basic net income per share effect |  | 0.07 |  | 0.02 |  | 0.02 |  | 0.002 |
Deferred Tax Assets and Liabilities The tax effects of temporary differences that give rise to the deferred tax assets and liabilities balances at December 31, 2015 and 2016 are as follows (in thousands):
|  | As of December 31, |
|  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | US$ |
Deferred tax assets - current: |  |  |  |  |  |  |
Provision of allowance for doubtful accounts |  | 13,229 |  | 21,910 |  | 3,156 |
Accrued payroll and expenses and others |  | 22,734 |  | 32,397 |  | 4,666 |
Total current deferred tax assets |  | 35,963 |  | 54,307 |  | 7,822 |
Deferred tax assets - non-current: |  |  |  |  |  |  |
Net operating loss carryforward |  | 4,676 |  | 11,402 |  | 1,642 |
Less: valuation allowance |  | (4,676 | ) | (11,402 | ) | (1,642 | )
Total non-current deferred tax assets, net |  | — |  | — |  | — |
|  | As of December 31, |
|  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | US$ |
Deferred tax liabilities - non-current: |  |  |  |  |  |  |
Equity investments acquired in disposal of subsidiaries |  | 1,312 |  | 1,312 |  | 189 |
As of December 31, 2016, the Group had net operating loss carryforward of approximately RMB45.6 million (US$6.6 million), which can be carried forward to offset future taxable income. Net operating loss carryforward of RMB3.6 million, RMB1.4 million, RMB5.0 million, RMB8.3 million and RMB27.3 million will expire in 2017, 2018, 2019, 2020 and 2021, respectively, if not utilized. Movement of Valuation Allowance Valuation allowance is provided against deferred tax assets when the Group determines that it is more likely than not that the deferred tax assets will not be utilized in the future. In making such determination, the Group considered factors including future reversals of existing taxable temporary differences, future profitability, and tax planning strategies. Valuation allowance was provided for net operating loss carryforward because it was more likely than not that such deferred tax assets will not be realized based on the Group’s estimate of its future taxable income. The following table sets forth the movement of the valuation allowance for deferred tax assets (in thousands):
|  | 2014 |  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | RMB |  | US$ |
Balance as of January 1, |  | 5,569 |  | 7,101 |  | 4,676 |  | 673 |
Additions |  | 3,153 |  | 2,121 |  | 6,838 |  | 985 |
Reversals |  | (1,621 | ) | (4,546 | ) | (112 | ) | (16 | )
Balance as of December 31, |  | 7,101 |  | 4,676 |  | 11,402 |  | 1,642 |
Uncertain Tax Positions A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows (in thousands):
|  | 2014 |  | 2015 |  | 2016 |  | 2016 |
|  | RMB |  | RMB |  | RMB |  | US$ |
Balance as of January 1, |  | 12,231 |  | 16,867 |  | 18,368 |  | 2,646 |
Increase related to current year tax positions |  | 4,636 |  | 1,501 |  | 3,355 |  | 483 |
Balance as of December 31, |  | 16,867 |  | 18,368 |  | 21,723 |  | 3,129 |
The Group did not accrue any potential penalties and interest related to these uncertain tax positions for all years presented on the basis that the likelihood of penalties and interest being charged is not considered to be high. The amounts of uncertain tax positions listed above are based on the recognition and measurement criteria of ASC 740. However, due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of uncertain tax positions may result in liabilities which could be materially different from these estimates. In such an event, the Group will record additional tax expense or tax benefit in the period in which such resolution occurs. The Group does not expect changes in uncertain tax positions recognized as of December 31, 2016 to be material in the next twelve months. In accordance with PRC Tax Administration Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five years to claw back underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities’ tax years from 2012 to 2016 remain subject to examination by tax authorities. There are no ongoing examinations by tax authorities as of December 31, 2016.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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