Income tax expense (Tables)

12 Months Ended

Dec. 31, 2019

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Summary of Income Tax Expense

The major components of income tax expense for the years ended December 31, 2017, 2018 and 2019 are as follows:

	31.12.2017			31.12.2018			31.12.2019			31.12.2019
	RMB’000			RMB’000			RMB’000			US$’000
Current income tax
- Current year		197,264			209,448			193,878			27,364
- Over provision in respect of prior years		(2,867	)		(729	)		(6,985	)		(986	)
Deferred tax
- Movement in temporary differences		(225	)		(2,052	)		(14,274	)		(2,014	)
Consolidated income tax expense reported in the statement of profit or loss		194,172			206,667			172,619			24,364

Reconciliation of Income Tax Expense

Income tax expense reported in the consolidated statement of profit or loss differs from the amount computed by applying the PRC income tax rate of 15% (being tax rate of Yuchai) for the years ended December 31, 2019, 2018 and 2017 for the following reasons:

	31.12.2017			31.12.2018			31.12.2019			31.12.2019
	RMB’000			RMB’000			RMB’000			US$’000
Accounting profit before tax		1,514,028			1,181,067			1,033,319			145,844
Computed tax expense at 15% (2018: 15%, 2017: 15%)		227,104			177,160			154,998			21,877
Adjustments resulting from:
Non-deductible expenses		21,982			5,146			3,982			562
Tax-exempt income		(58,324	)		(3,634	)		(6,171	)		(871	)
Utilization of deferred tax benefits previously not recognized		(16,687	)		(5,518	)		(5,076	)		(716	)
Deferred tax benefits not recognized		8,084			2,183			6,613			933
Tax credits for research and development expense		(34,428	)		(22,407	)		(31,863	)		(4,497	)
Tax rate differential		21,061			24,437			26,223			3,701
Over provision in respect of previous years current tax		(2,867	)		(729	)		(6,985	)		(986	)
Withholding tax expense		29,447			30,029			30,898			4,361
Others		(1,200	)		—			—			—
Total		194,172			206,667			172,619			24,364

Summary of Deferred Tax

Deferred tax relates to the following:

	Consolidated statement of financial position									Consolidated statement of profit or loss
	31.12.2018			31.12.2019			31.12.2019			31.12.2017			31.12.2018			31.12.2019			31.12.2019
	RMB’000			RMB’000			US$’000			RMB’000			RMB’000			RMB’000			US$’000
Deferred tax liabilities
Accelerated tax depreciation		(27,554	)		(44,920	)		(6,340	)		(4,601	)		(12,432	)		(17,366	)		(2,451	)
Interest receivable		(2,252	)		(1,644	)		(232	)		679			(1,478	)		608			86
PRC withholding tax on dividend income (i)		(106,922	)		(106,922	)		(15,091	)		(29,031	)		(29,842	)		(30,721	)		(4,336	)
		(136,728	)		(153,486	)		(21,663	)		(32,953	)		(43,752	)		(47,479	)		(6,701	)
Deferred tax assets
Impairment of property, plant and equipment		15,943			6,648			938			9,443			3,624			(9,295	)		(1,312	)
Write-down of inventories		16,060			18,403			2,598			(3,716	)		(1,433	)		2,343			331
Allowance for doubtful account receivables		5,177			10,077			1,422			(1,964	)		(2,199	)		4,900			692
Accruals		204,554			250,662			35,379			18,778			(186	)		46,108			6,508
Deferred income		95,499			107,731			15,205			6,743			43,820			12,232			1,726
Others		23,974			29,439			4,155			3,894			2,178			5,465			770
		361,207			422,960			59,697			33,178			45,804			61,753			8,715
											225			2,052			14,274			2,014

Note:

(i)  The movement of PRC withholding tax on dividend income is as follows:

	31.12.2018			31.12.2019			31.12.2019
	RMB’000			RMB’000			US$’000
At January 1		(100,572	)		(106,922	)		(15,091	)
Provision made to consolidated statement of profit or loss		(29,842	)		(30,721	)		(4,336	)
Utilization		23,492			30,721			4,336
December 31		(106,922	)		(106,922	)		(15,091	)

The Corporate Income Tax (“CIT”) law provides for a tax of 10% to be withheld from dividends paid to foreign investors of PRC enterprises. This withholding tax provision does not apply to dividends paid out of profit earned prior to January 1, 2008. Beginning on January 1, 2008, a 10% withholding tax is imposed on dividends paid to the Company, as a non-resident enterprise, unless an applicable tax treaty provides for a lower tax rate. The Company recognizes a deferred tax liability for withholding tax payable for profits accumulated after December 31, 2007 for the earnings that the Company does not plan to indefinitely reinvest in the PRC enterprises. As of December 31, 2019, the deferred tax liability for withholding tax payable was RMB 106.9 million (US$15.1 million) (2018: RMB 106.9 million). The amount of unrecognized deferred tax liability relating to undistributed earnings of the PRC enterprises is estimated to be RMB 253.5 million (US$35.8 million) (2018: RMB 249.2 million).

Classification of the Group's Net Deferred Tax Assets

The following table represents the classification of the Group’s net deferred tax assets:

	31.12.2018			31.12.2019			31.12.2019
	RMB’000			RMB’000			US$’000
Deferred tax assets		361,207			422,960			59,697
Deferred tax liabilities		(136,728	)		(153,486	)		(21,663	)
		224,479			269,474			38,034

Deferred Tax Assets That Have Not Been Recognized

Deferred tax assets have not been recognized in respect of the following items:

	31.12.2018		31.12.2019		31.12.2019
	RMB’000		RMB’000		US$’000
Unutilized tax losses		396,232		414,226		55,925
Unutilized capital allowances and investment allowances		107,588		107,613		15,185
Other unrecognized temporary differences relating to asset impairment and deferred grants		222,868		215,296		31,456
		726,688		737,135		102,566