We may be classified as a passive foreign investment company, which could result in adverse
U.S. federal income tax consequence to U.S. Holders of our ADSs or ordinary shares.
A non-U.S. corporation, such as our own, will be considered a passive foreign investment company, or PFIC, for any taxable year if either (i) at least 75% of its gross income is passive income or
(ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. The value of our assets is
generally determined by reference to the market price of the ADSs and ordinary shares, which may fluctuate considerably. In addition, because there are uncertainties in the application of the relevant rules and because PFIC status is a
fact-intensive determination made on an annual basis, no assurance may be given with respect to our PFIC status for the current or any future taxable year.
Although under certain interpretations of how one determines what portion of goodwill and certain other assets are treated as
passive, we may have been a PFIC for 2015, we believe under more reasonable approaches for our circumstances, based on the market price of our ADSs and ordinary shares, the value of our assets, and the composition of our assets and
income, that we were not a PFIC for our taxable year ended December 31, 2015. In addition, we do not believe that we were a PFIC for our taxable year ended December 31, 2016 even under the least favorable interpretations of what
portion of goodwill and certain other assets are treated as passive. However, given the lack of authority and the highly factual nature of the analyses, no assurance can be given. We do not expect to be a PFIC for our taxable year
ending December 31, 2017 or for the foreseeable future. However, our PFIC status for the current taxable year ending December 31, 2017 will not be determinable until the close of the taxable year, and, accordingly, there is no guarantee
that we will not be a PFIC for the current taxable year (or any future taxable year).
If we were treated as a PFIC for
any taxable year during which a U.S. Holder (defined below) held an ADS or an ordinary share, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder. See Item 10.E. Additional
InformationTaxationUnited States Federal Income Tax ConsiderationsPassive Foreign Investment Company.
Information on the Company
History and Development of the Company
We were incorporated in the Cayman Islands in January 2000. Since our inception, we have conducted our operations in China
principally through Baidu Online, our wholly owned subsidiary in Beijing, China. Since June 2001, we also have conducted part of our operations in China through Baidu Netcom, a consolidated affiliated entity in Beijing, China, which holds the
licenses and approvals necessary to operate our platform and provide value-added telecommunication-based online advertising services. In more recent years, we have established additional subsidiaries inside and outside of China and assisted in
establishing additional PRC consolidated affiliated entities to conduct part of our operations.
On August 5, 2005,
we listed our ADSs on The NASDAQ National Market (later renamed The NASDAQ Global Market) under the symbol BIDU. We and certain selling shareholders of our company completed the initial public offering of 4,604,224 ADSs, each then
representing one Class A ordinary share, on August 10, 2005. On May 12, 2010, we effected a change of the ADS to Class A ordinary share ratio from 1 ADS representing 1 Class A ordinary share to 10 ADSs representing 1
Class A ordinary share. The ratio change has the same effect as a 10-for-1 ADS split. Our ADSs are currently traded on The NASDAQ Global Select Market.
In December 2008, our shareholders approved our name change from Baidu.com, Inc. to Baidu, Inc. In November 2009, we moved
into our new corporate headquarters, which we name as Baidu Campus. Our principal executive offices are located at Baidu Campus, No. 10 Shangdi 10th Street, Haidian District, Beijing 100085, the Peoples Republic of China. Our
telephone number at this address is +86 (10) 5992-8888.