14. INCOME TAX

Cayman Islands

Under the current laws of the Cayman Islands, the Company is 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 S.A.R.

Under the current Hong Kong S.A.R. Inland Revenue Ordinance, the Company’s Hong Kong S.A.R. subsidiary is subject to Hong Kong S.A.R. profits tax at the rate of 16.5% on its taxable income generated from the operations in Hong Kong S.A.R. Payments of dividends by the Hong Kong S.A.R. subsidiary to the Company is not subject to withholding tax in Hong Kong S.A.R. A two-tiered profits tax rates regime was introduced in 2018 where the first HK$2 million of assessable profits earned by a company will be taxed at half of the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates. No provision for Hong Kong S.A.R. profits tax has been made in the financial statements for the years ended December 31, 2023, 2024 and 2025.

PRC

The Group’s PRC subsidiaries, VIE and VIE’s subsidiaries are subject to the PRC Corporate Income Tax Law (“CIT Law”) at the statutory income tax rate of 25%, unless otherwise specified. According to the CIT Law, entities that qualify as high-and-new technology enterprises (“HNTE”) are entitled to a preferential income tax rate of 15%. VIE obtained the HNTE certificate in October 2017 and subsequently renewed the HNTE certificate in October 2020 and October 2023. Thus, it entitles to the preferential tax rate of 15% from 2017 to 2024. The Company applies the statutory income tax rate of 25% in 2025. WFOE obtained the HNTE certificate in October 2023, thus, it entitles to the preferential tax rate of 15% from 2023 to 2025.

The components of income (loss) before income taxes are as follows:

SCHEDULE OF COMPONENTS OF INCOME (LOSS) BEFORE INCOME TAXES 

The Group had no current income tax expense for the years ended December 31, 2023, as the entities in the Group had no taxable income in the respective year. For the years ended December 31, 2024 and 2025, the current income tax expenses were RMB69 and RMB277 in the PRC, respectively.

For the year ended December 31, 2025, all income taxes paid by the Group were remitted to the PRC tax authorities.

Reconciliation of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for the years ended December 31, 2023 and 2024 is as follows:

SCHEDULE OF RECONCILIATION OF PRC STATUTORY INCOME TAX RATE 

b) Deferred income tax assets

SCHEDULE OF DEFERRED INCOME TAX ASSETS

As of December 31, 2025, the Group had net operating loss carry forwards of RMB1,051,232 mainly attributable to the PRC subsidiaries, the VIE and VIE’s subsidiaries, and subsidiary in Hong Kong S.A.R.. The losses of RMB1,046,331 by the PRC subsidiaries, the VIE and VIE’s subsidiaries will expire during the period from 2026 to 2030, except for those arose from HNTEs, which will expire during the period from 2026 to 2035, if not utilized. As of December 31, 2025, the Group also has a loss of RMB2,003 carry forwards from the subsidiary in Hong Kong S.A.R. that has an indefinite life.

A valuation allowance is provided against deferred income tax assets when the Group determines that it is more likely than not that the deferred income tax assets will not be utilized in the foreseeable future. The Group has incurred accumulated net operating losses for income tax purposes since its inception. The Group believes that it is more likely than not that these accumulated net operating losses and other deferred tax assets will not be utilized in the foreseeable future. Accordingly, the Group has provided full valuation allowance for the deferred income tax assets as of December 31, 2024 and 2025.

Changes in valuation allowance for the years ended December 31, 2023, 2024 and 2025 are as follows:

SCHEDULE OF CHANGES IN VALUATION ALLOWANCE 

According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under special circumstances where the underpayment of taxes is more than RMB100. In the case of transfer pricing issues, the statute of limitation is 10 years. There is no statute of limitation in the case of tax evasion. The income tax returns of the Company’s PRC subsidiaries and VIE for the years from 2021 to 2025 are open to examination by the PRC tax authorities.