NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Hong Kong. Under the current laws of the Cayman Islands and BVI, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the Company to its
shareholders, neither Cayman Islands nor BVI withholding tax will be imposed. Under the Hong Kong tax laws, subsidiaries in Hong Kong are subject to the Hong Kong profits tax rate at 16.5% and they may be exempted from income tax on their
foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
Under the PRC Enterprise Income Tax
(EIT) Law, which has been effective since January 1, 2008, domestic enterprises and Foreign Investment Enterprises (the FIE) are subject to a unified 25% enterprise income tax rate, except for certain entities that are
entitled to preferential tax treatments.
The effective tax rates were 25.43% and 18.62% for the three-month periods ended March 31,
2016 and 2017, respectively. The effective tax rates for the three-month period ended March 31, 2017 were lower than the PRC statutory EIT rate of 25% mainly due to preferential tax rates associated with High and New Technology Enterprises granted
to certain PRC subsidiaries and VIEs.
The effective tax rates are subject to change in subsequent quarters as the estimates of pretax
income or loss for the year increase or decrease and certain subsidiaries of the Company may or may not continue to qualify for certain preferential tax rates.
The Company did not provide deferred income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries for the
year 2016 and the three-month period ended March 31, 2017 on the basis of its intent to permanently reinvest foreign subsidiaries earnings. As of March 31, 2017, the total amount of undistributed earnings from the Companys PRC
subsidiaries for which no withholding tax has been accrued was RMB92.97 billion (US$13.51 billion). Under the PRC tax regulations, dividends from PRC companies to their overseas parents in respect of earnings derived from January 1, 2008
onwards are subject to PRC dividend withholding tax at 10%. Such rate could be reduced to 5% should treaty benefits be applicable. In the case of the Companys VIEs in the PRC, their undistributed earnings were insignificant as of each of the
balance sheet dates.
||RESTRICTED NET ASSETS |
Under PRC laws and regulations, there are restrictions on the
Companys PRC subsidiaries and VIEs with respect to transferring certain of their net assets to the Company either in the form of dividends, loans, or advances. The amount of net assets restricted include paid in capital and statutory reserve
funds of the Companys PRC subsidiaries and the net assets of the VIEs in which the Company has no legal ownership, totaling RMB13.70 billion and RMB15.40 billion (US$2.24 billion) as of December 31, 2016 and March 31, 2017,