Taxation

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Taxation

11. Taxation

a) Value added tax (“VAT”)

For sales of pre-owned consumer electronic products, the Group is subject to the VAT levy rate of 3% under the simplified method and is exempted by 1% in comply with relevant PRC VAT regulations of CaiShui [2009] No.9 and CaiShui [2014] No.57. The Group is subject to statutory VAT rate of 13% for sales of other products in the PRC. The Group is subject to VAT at the rate of 6% for service revenue.

b) Income tax

Cayman Islands

Under the current laws of the Cayman Islands, the Company and its subsidiaries incorporated in the Cayman Islands are not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

Hong Kong

Under the current Hong Kong Inland Revenue Ordinance, the Company’s subsidiaries incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on its taxable income generated from operations in Hong Kong. Commencing from the year of assessment 2018/2019, the first Hong Kong dollars (“HKD”) 2 million of profits earned by its subsidiaries incorporated in Hong Kong will be taxed at half the current tax rate (i.e., 8.25%) while the remaining profits will continue to be taxed at the existing 16.5% tax rate. Under the Hong Kong tax laws, the Company is exempted from the Hong Kong income tax on its foreign-derived income. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.

Mainland China

Under the PRC Enterprise Income Tax Law (the “EIT Law”), the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%. All of the Group’s PRC subsidiaries, consolidated VIE and VIE’s subsidiaries are subject to the statutory income tax rate of 25% except for Shanghai Yueyee which obtained qualification as High and New Technologies Enterprises, or HNTE in 2018 and was entitled to a preferential EIT rate of 15% from 2018 to 2020. In 2021, Shanghai Yueyee renewed its qualification and was entitled to the preferential EIT rate of 15% from 2021 to 2023.

Loss by tax jurisdictions

	Years ended December 31,
	2019		2020		2021
	RMB		RMB		RMB
Loss from Mainland China operations		722,687		456,596		882,229
Loss from non-Mainland China operations		10,122		53,816		71,618
Total loss before tax and share of loss of equity-method investments		732,809		510,412		953,847

The reconciliation of total tax expenses computed by applying the respective statutory income tax rate to pre-tax income is as follows:

11. Taxation—(Continued)

The current and deferred portion of income tax expenses included in the consolidated statements of operations and comprehensive loss are as follows:

	Years ended December 31,
	2019			2020			2021
	RMB			RMB			RMB
Current tax expenses		—			—			—
Deferred tax benefits		(30,120	)		(47,320	)		(143,863	)
Total income tax benefits		(30,120	)		(47,320	)		(143,863	)

The Group did not incur any current income tax expenses for the years ended December 31, 2019, 2020 and 2021. The reconciliation of total tax expenses computed by applying the respective statutory income tax rate to pre-tax income is as follows:

	Years ended December 31,
	2019			2020			2021
	RMB			RMB			RMB
PRC income tax rate		25.00	%		25.00	%		25.00	%
Expenses not deductible for tax purposes		(1.03	%)		(2.75	%)		(11.86	%)
Super deduction on technology and content expenses		2.87	%		3.52	%		2.83	%
Effect of preferential tax rate for high-tech enterprises		(2.69	%)		(6.16	%)		6.25	%
Effect of different tax rates of a subsidiary operating in other jurisdiction		(0.12	%)		(1.33	%)		(1.85	%)
Effect of enacted tax rate change of deferred tax liabilities		—			0.20	%		—
Effect of expired tax loss		—			—			(0.54	%)
Change in valuation allowance		(20.03	%)		(9.42	%)		(4.62	%)
True up		0.11	%		0.21	%		(0.13	%)
Total		4.11	%		9.27	%		15.08	%

If the preferential tax rate granted to an entity of the Group were not available, the Group’s income tax benefit would have increased by RMB19,037, RMB31,460, decreased by RMB59,594 for the years ended December 31, 2019, 2020 and 2021, respectively. The basic and diluted net loss per share attributable to the Company would decrease by RMB1.01, RMB1.68, and increased by RMB0.62 for the years ended December 31, 2019, 2020 and 2021, respectively. Shanghai Yueyee obtained HNTE in December 2021 and it is subject to reduced income tax rate of 15% till 2023, bring an effect of preferential tax rate of income tax benefit amounted to RMB93,250 for the year ended December 31, 2021.

11. Taxation—(Continued)

Deferred tax assets and deferred tax liabilities:

	As of December 31,
	2019			2020			2021
	RMB			RMB			RMB
Deferred tax assets
Tax loss carried forward		229,955			283,378			278,980
Deductible temporary differences		38,481			32,982			59,598
Allowance for credit losses		98			—			375
Inventory provision		—			—			649
Unrealized fair value losses for certain investments		—			—			438
Impairment loss of long-term investments		—			—			4,125
Total deferred tax assets		268,534			316,360			344,165
Less: valuation allowance		(268,534	)		(316,360	)		(344,165	)
Net deferred tax assets		—			—			—
Deferred tax liabilities
Identifiable intangible assets and deferred cost acquired		389,280			341,960			223,138
Total deferred tax liabilities		389,280			341,960			223,138

The movement of deferred tax valuation allowance is as follows:

	As of December 31,
	2019		2020		2021
	RMB		RMB		RMB
Balance at beginning of the year		119,106		268,534		316,360
Additions, net of foreign exchange impacts		149,428		47,826		27,805
Balance at end of the year		268,534		316,360		344,165

As of December 31, 2019, 2020 and 2021, the Group had net operating loss carry forwards of approximately RMB926,237, RMB1,155,441 and RMB1,199,251, respectively, which arose from the subsidiaries, VIE and VIE’s subsidiaries established in the PRC, Hong Kong. The loss carry forwards will expire until receive of notice from local tax authorities. The Group has provided a full valuation allowance for the deferred tax assets as of December 31, 2019, 2020 and 2021, as management is not able to conclude that the future realization of those net operating loss carry forwards and other deferred tax assets are more likely than not.

The deferred tax component of income tax benefits are related to the amortization of deferred tax liabilities resulting from the business and assets acquisitions.

In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008, are subject to a 10% withholding income tax. In addition, under tax treaty between the PRC and Hong Kong, if the foreign investor is incorporated in Hong Kong and qualifies as the beneficial owner, the applicable withholding tax rate is reduced to 5%, if the investor holds at least 25% in the FIE, or 10%, if the investor holds less than 25% in the FIE. The Company’s subsidiaries and VIE located in the PRC and Hong Kong were in accumulated deficit as of December 31, 2019, 2020 and 2021. Accordingly, no deferred tax liability has been accrued for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to the Company as of December 31, 2019, 2020 and 2021.