v3.26.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

14. INCOME TAXES

 

The Company is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to income or capital gains taxes. The Company’s subsidiary BaiJiaHuLian HK is located in Hong Kong. From April 2018, BaiJiaHuLian HK is subject to an income tax rate of 8.25% for the first HKD2 million of assessable profit and 16.5% for profit exceeding HKD2 million. No provision for Hong Kong profits tax was made as the Group had no estimated assessable profit that was subject to Hong Kong profits tax for the years ended December 31, 2024 and 2025.

 

The Company’s subsidiary, the VIEs and VIEs’ subsidiaries, which were entities incorporated in mainland China (the “Mainland China entities”), are subject to mainland China Enterprise Income Tax (“EIT”) on their taxable income in accordance with the relevant income tax laws of mainland China, which have adopted a unified income tax rate of 25% since January 1, 2008 with the following exceptions.

 

Beijing Gaotu qualified as a High and New Technology Enterprise (the “HNTE”) from 2017 through 2022 and accordingly was entitled to the 15% preferential tax rate during the period. The HNTE qualification has been renewed in 2023 and is set to expire by 2026.

 

Beijing Lexuebang also qualified as a HNTE from 2019 through 2024 and accordingly was entitled to the 15% preferential tax rate during the period. The HNTE qualification has been renewed in 2025 and is set to expire by 2028.

 

Beijing Yuexuebang obtained the qualification of the Software Enterprise Certificate in February 2024 and renewed in 2025. Therefore, Beijing Yuexuebang adopted exemption from EIT for the years 2023 and 2024, and can enjoy a reduced tax rate of 12.5% in 2025.

 

 

 

14. INCOME TAXES - continued

 

Income (loss) before income taxes consists of:

 

 

Year ended December 31,

 

 

2023

 

 

2024

 

 

2025

 

 

RMB

 

 

RMB

 

 

RMB

 

Chinese mainland

 

2,277

 

 

 

(1,040,744

)

 

 

(411,103

)

Non-Chinese mainland

 

10,247

 

 

 

422

 

 

 

83,685

 

Income/(loss) before income tax

 

12,524

 

 

 

(1,040,322

)

 

 

(327,418

)

 

For the year ended December 31, 2025, income tax benefit amounted to RMB4,111 in Chinese mainland, and income tax expense amounted to nil in jurisdictions outside Chinese mainland.

 

The current and deferred components of the income tax expense appearing in the consolidated statement of operations were as follows:

 

 

Year ended December 31,

 

 

2023

 

 

2024

 

 

2025

 

 

RMB

 

 

RMB

 

 

RMB

 

Current tax (expenses)/ benefits

 

 

(8,744

)

 

 

123

 

 

 

169

 

Deferred tax (expenses)/benefits

 

 

(1,913

)

 

 

(8,755

)

 

 

3,942

 

 

 

(10,657

)

 

 

(8,632

)

 

 

4,111

 

 

The principle components of deferred tax assets were as follows:

 

 

As of December 31,

 

 

2024

 

 

2025

 

 

RMB

 

 

RMB

 

Deferred tax assets:

 

 

 

 

 

 

Deductible temporary difference related to advertising
   expenses

 

 

786,469

 

 

 

893,927

 

Net operating loss carrying forwards

 

 

827,031

 

 

 

782,319

 

Transfer of intangible assets

 

 

1,002

 

 

 

833

 

Accrued liabilities

 

 

1,891

 

 

 

1,904

 

Total deferred tax assets

 

 

1,616,393

 

 

 

1,678,983

 

Less: valuation allowance

 

 

(1,616,393

)

 

 

(1,678,983

)

Deferred tax assets, net

 

 

—

 

 

 

—

 

 

 

 

14. INCOME TAXES - continued

 

The movements of valuation allowance for the years end December 31, 2023, 2024 and 2025 were as follows:

 

 

Year ended December 31,

 

 

2023

 

 

2024

 

 

2025

 

 

RMB

 

 

RMB

 

 

RMB

 

Balance at beginning of the period

 

 

1,351,067

 

 

 

1,397,121

 

 

 

1,616,393

 

Acquisitions

 

 

—

 

 

 

—

 

 

 

49,056

 

Additions

 

 

46,054

 

 

 

219,272

 

 

 

13,534

 

Balance at end of the period

 

 

1,397,121

 

 

 

1,616,393

 

 

 

1,678,983

 

 

The principle components of deferred tax liabilities were as follows:

 

 

As of December 31,

 

 

2024

 

 

2025

 

 

RMB

 

 

RMB

 

Deferred tax liabilities:

 

 

 

 

 

 

Building and land use right

 

 

65,706

 

 

 

63,906

 

Intangible assets

 

 

4,475

 

 

 

10,589

 

Unrecognized gains of investments

 

 

423

 

 

 

753

 

Total deferred tax liabilities

 

 

70,604

 

 

 

75,248

 

 

As of December 31, 2025, the Group had net operating loss carried forward of RMB3,941,813 from the Company’s Mainland China entities, which will expire on various dates from December 31, 2025 to December 31, 2034.

 

14. INCOME TAXES - continued

 

The reconciliation of the effective tax rate and the statutory income tax rate applicable to operations was as follow:

 

 

Year ended December 31,

 

 

2023

 

 

2024

 

 

RMB

 

 

RMB

 

Income/(loss) before provision for income tax
   and share of results of equity investees

 

 

12,524

 

 

 

(1,040,322

)

Income tax (expense)/benefits computed at an
   applicable tax rate of 25%

 

 

(3,131

)

 

 

260,081

 

Effect of permanent differences

 

 

(27,346

)

 

 

(34,587

)

Effect of research and development super-deduction

 

 

44,935

 

 

 

52,705

 

Effect of preferential tax rate

 

 

17,480

 

 

 

(67,850

)

Effect on tax rates in different tax jurisdictions

 

 

3,459

 

 

 

291

 

Change in valuation allowance

 

 

(46,054

)

 

 

(219,272

)

 

 

(10,657

)

 

 

(8,632

)

 

 

 

14. INCOME TAXES - continued

 

 

Year ended December 31,

 

 

2025

 

 

RMB

 

 

Percent

 

Loss before income tax

 

(327,418

)

 

 

 

Income tax benefits at PRC statutory rate

 

81,855

 

 

 

25.0

%

Other jurisdictions' tax effects

 

 

 

 

 

    Cayman Islands

 

 

 

 

 

        Statutory tax rate difference between PRC and other
            jurisdictions

 

19,915

 

 

 

6.1

%

    Hong Kong

 

1,067

 

 

 

0.3

%

    Other foreign jurisdictions

 

(61

)

 

 

0.0

%

Effect of changes in tax laws or rates enacted in the current year

 

—

 

 

 

0.0

%

Effect of cross-border tax laws

 

—

 

 

 

0.0

%

Change in valuation allowance

 

(13,493

)

 

 

(4.1

)%

Nontaxable or nondeductible items

 

 

 

 

 

    Non-taxable income

 

—

 

 

 

0.0

%

    Non-deductible expenses

 

(4,390

)

 

 

(1.3

)%

        Share-based compensation expenses

 

(2,446

)

 

 

(0.7

)%

        Others

 

(1,944

)

 

 

(0.6

)%

Changes in unrecognized tax benefits

 

—

 

 

 

0.0

%

Other adjustments

 

 

 

 

 

    Effect of preferential tax rate

 

(114,066

)

 

 

(34.9

)%

    Effect of research and development super-deduction

 

31,596

 

 

 

9.7

%

    Others

 

1,688

 

 

 

0.5

%

Income tax benefits

 

4,111

 

 

 

1.3

%

 

 

 

14. INCOME TAXES - continued

 

If Beijing Gaotu, Beijing Lexuebang and Beijing Yuexuebang did not enjoy income tax preferential tax rates, tax expenses would have increased by RMB17,480 for the years ended December 31, 2023, tax benefits would decreased by RMB67,850 and RMB49,001 for the years ended December 31, 2024 and 2025, respectively. The decrease in basic and diluted net income per ordinary share was approximately RMB0.10 for the years ended December 31, 2023, the increase in basic and diluted net loss per ordinary share was RMB0.40 and RMB0.30 for the years ended December 31, 2024 and 2025, respectively.

 

The Group did not identify significant unrecognized tax benefits for the year ended December 31, 2025. The Group did not incur any interest and penalties related to potential underpaid income tax expenses and also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from December 31, 2025. As of December 31, 2024 and 2025, the Group did not have any significant unrecognized uncertain tax positions.

 

Aggregate undistributed earnings of the Company’s mainland China subsidiaries and the VIEs that are available for reinvestment. Upon distribution of such earnings, the Company will be subject to mainland China EIT, the amount of which is impractical to estimate. The Company did not record any withholding tax on any of the aforementioned undistributed earnings because the relevant subsidiaries do not intend to declare dividends and the Company intends to permanently reinvest it within the mainland China. Additionally, no deferred tax liability was recorded for taxable temporary differences attributable to the undistributed earnings of VIEs because the Company believes the undistributed earnings can be distributed from the VIEs to WFOEs in a manner that would not be subject to income tax.