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TAXATION

12 Months Ended

Dec. 31, 2023

TAXATION

TAXATION

20.TAXATION

Enterprise income tax:

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

British Virgin Islands

Under the current laws of the British Virgin Islands, subsidiaries in British Virgin Islands are not subject to tax on income or capital gains. In addition, upon payments of dividends by these companies to their shareholders, no British Virgin Islands withholding tax will be imposed.

United States

US Proton is incorporated in the State of Delaware, U.S.A. in 2011. The entity is subject to U.S. Federal and state Income Tax (graduated income tax rate were 21% in 2021, 2022 and 2023 on its taxable income under the current laws of the United States of America. The company’s activities are located solely in the state of Texas, as such it is subject to Texas Franchise Tax. The amount of current income tax for federal and state for US Proton was RMB362, RMB196 and RMB404 (USD$57) for the years ended December 31, 2021, 2022, and 2023.

Singapore

China Medstar is incorporated in Singapore and does not conduct any substantive operations of its own, which was disposed in 2022 as a subsidiary of Guofu Huimei (Note 4). No provision for Singapore profits tax has been made in the consolidated financial statements as the companies have no assessable profits for the years ended December 31, 2021 and 2022. In addition, upon payments of dividends by China Medstar and CHS to its shareholder, no Singapore withholding tax will be imposed.

Hong Kong

Subsidiaries in Hong Kong do not conduct any substantive operations of their own.

No provision for Hong Kong profits tax has been made in the consolidated financial statements as the Group has no assessable profits for the year presented. In addition, upon payment of dividends by these companies to their shareholders, no Hong Kong withholding tax will be imposed.

China

The applicable rate for China entities is subject to the PRC EIT at the rate of 25% for the period since 2012.

Dividends paid by PRC subsidiaries of the Group out of the profits earned after December 31, 2007 to non-PRC tax resident investors would be subject to PRC withholding tax. The withholding tax would be 10%, unless a foreign investor’s tax jurisdiction has a tax treaty with China that provides for a lower withholding tax rate and the foreign investor is qualified as a beneficial owner under the relevant tax treaty.

In general, for circumstances not being tax evasion, the PRC tax authorities will conduct examinations of the PRC entities’ tax filings of up to five years. Accordingly, the PRC entities’ tax years from 2018 to 2023 remain subject to examination by the tax authorities.

Loss before income taxes consists of:

​

​	​	​	​	​	​	​	​	​
​	​	For the Years Ended December 31,
​	​	2021	​	2022	​	2023	​	2023
​		RMB		RMB		RMB		US$
Non – PRC		5,451		45,211		20,824	​	2,933
PRC		(534,688)		(885,107)		(576,418)	​	(81,189)
​		(529,237)		(839,896)		(555,594)	​	(78,256)

​

The current and deferred components of the income tax expense (benefit) appearing in the consolidated statements of comprehensive loss are as follows:

​

​	​	​	​	​	​	​	​	​
​	​	For the Year Ended December 31,
​	​	2021	​	2022	​	2023	​	2023
​		RMB		RMB		RMB		US$
Current tax expense (benefit)	​	4,115	​	(8,765)	​	(7,014)	​	(988)
Deferred tax benefit	​	(10,680)	​	(62,141)	​	(17,559)	​	(2,473)
​	​	(6,565)		(70,906)	​	(24,573)	​	(3,461)

​

A reconciliation of the differences between the statutory tax rate and the effective tax rate for EIT is as follows:

​

​	​	​	​	​	​	​	​	​
​	​	For the Years Ended December 31,
​	​	2021	​	2022	​	2023	​	2023
​		RMB	​	RMB		RMB		US$
Loss before income taxes		(529,237)		(839,896)		(555,594)		(78,256)
Income tax computed at the tax rate of 25%		(132,309)	​	(209,974)		(138,899)		(19,564)
Effect of different tax rates in different jurisdictions		2,798	​	(20,584)		(5,178)		(728)
Non-deductible expenses		(10,502)	​	21,543		18,287		2,575
Non-taxable income		9,183	​	(55,705)		(6,447)		(908)
Statutory income (expense)	​	3,994	​	25,419	​	51,631	​	7,272
Interest and penalty	​	(12,918)	​	(7,254)	​	(6,121)	​	(862)
Deferred tax expense	​	(13,953)	​	7,056	​	3,357	​	473
Changes of valuation allowance		142,806	​	168,102		58,030		8,173
Withholding tax		4,336	​	491		767		108
​		(6,565)	​	(70,906)		(24,573)		(3,461)

​

Deferred Tax

The components of deferred taxes are as follows:

​

​	​	​	​	​	​	​
​	​	As at December 31,
​	​	2022	​	2023	​	2023
​		RMB		RMB		US$
Deferred tax asset				​
Net operating loss*		357,483		425,390		59,915
Foreign exchange loss	​	1,330	​	2,755	​	388
Depreciation and amortization		22,535		17,647		2,485
Property, plant and equipment impairment		6,997		2,340		330
Deposits for non-current assets		18,475		17,725		2,496
Allowance for net investment in financing lease		5,137		—		—
Allowance for doubtful accounts		14,746		29,299		4,127
Lease liabilities		58,901		59,875		8,433
Other long-term assets		104,912		94,791		13,351
Equity investment		7,553		7,005		987
Others		13,728		11,770		1,658
Total deferred tax assets		611,797		668,597		94,170
less: Valuation allowance**		(565,022)		(623,044)		(87,754)
Net deferred tax assets		46,775		45,553		6,416
​	​	​	​	​	​	​
Deferred tax liabilities		​		​		​
Equity investment		(1,170)		(1,091)		(154)
Property, plant and equipment		(1,682)		(2,368)		(334)
Disposal of Beijing Century Friendship		(3,126)		(3,126)		(440)
Intangible assets		(81,336)		(71,825)		(10,116)
Right-of-use assets		(46,873)		(45,626)		(6,426)
Capitalized interest		(19,179)		(18,993)		(2,675)
Others		(5,986)		(2,062)		(291)
​	​	​	​	​	​	​
Total deferred tax liabilities		(159,352)		(145,091)		(20,436)
​	​	​	​	​	​	​
Deferred tax assets, net		—		—		—
​	​	​	​	​	​	​
Deferred tax liabilities, net		(112,577)		(99,538)		(14,020)

*     As of December 31, 2023, the Group had net operating losses from several of its PRC and oversea entities of RMB1,703,345 (US$239,911), which can be carried forward to offset future taxable profit. As per filed tax returns, the net operating loss from PRC entities will expire between 2024 to 2028. For the net operating loss from overseas entities, there is no limitation of expiration according to the statute of Hong Kong and US.

**   The Group records a valuation allowance on its deferred tax assets that is sufficient to reduce the deferred tax assets to an amount that is more likely than not to be realized. Future reversal of the valuation allowance will be recognized either when the benefit is realized or when it has been determined that it is more likely than not that the benefit in future earnings will be realized.

The movement of valuation allowance is as follows:

​

​	​	​	​	​	​	​
​	​	For the Year Ended December 31,
​	​	2022	​	2023	​	2023
​		RMB		RMB		US$
Balance at the beginning of year		(396,919)		(565,022)		(79,582)
Change of valuation allowance in the current year		(168,103)		(58,022)		(8,172)
Balance at the end of year		(565,022)		(623,044)		(87,754)

​

Unrecognized Tax Benefits

The reconciliation of the beginning and ending amount of unrecognized tax benefits excluding the penalty and interest is as follows:

​

​	​	​	​	​	​	​
​	​	For the Years Ended December 31,
​	​	2022	​	2023	​	2023
​		RMB		RMB		US$
Balance at the beginning of year		81,901		67,172		9,461
Changes based on tax positions related to the current year		322		—		—
Additions related to prior year tax position		1,072		12,084		1,702
Decreases related to prior year tax position		(6,617)		(14,104)		(1,987)
Decrease related to disposal of CMSI		(7,861)		(7,861)		(1,107)
Decreases relating to expiration of applicable statute of limitation		(3,572)		(1,997)		(281)
Foreign currency translation		1,927		8,605		1,212
Balance at the end of year	​	67,172	​	63,899	​	9,000

​

As of December 31, 2022, and 2023, the Group had unrecognized tax benefit of RMB67,172 and RMB63,899 (US$ 9,000), respectively, among which, RMB19,962 and RMB28,712 (US$4,044) were presented on a net basis against the deferred tax assets related to tax losses carry forwards on the consolidated balance sheets. At December 31, 2022 and 2023, there were RMB39,412 and RMB35,421 (US$4,989) of unrecognized tax benefits that if recognized would affect the annual effective tax rate.

The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statute of limitations. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. However, an estimate of the range of the possible change cannot be made at this time.

The Group recognized a decrease amounting to RMB12,918, a decrease amounting to RMB7,254 and a decrease amounting to RMB6,121 (US$862) in interest and penalties during the years ended December 31, 2021, 2022 and 2023, respectively. As of December 31, 2022, and 2023, the Group recognized of interest and penalties of RMB13,091 and RMB9,283 (US$1,307), respectively. Uncertain tax benefits were recorded as other long-term liabilities.

Value-added taxes (“VAT”)

After a new VAT reform came into effect on 1 April 2019, the rental income derived from movable property leasing arrangement is subject to VAT at 13%. The technical service income is subject to VAT at 6%.

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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.

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