Company: VSA
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001410578-25-001300
Chunk: 152

Company: VisionSys AI Inc
Filing Date: 2025-05-15
Form: 20-F
Item: Item 4
Chunk 152
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 Treaty Benefits, or Circular 35, which became effective on January 1, 2020, which sets forth that non-resident enterprises and their withholding agents shall enjoy treaty benefit by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference.” However, if a competent tax authority finds out that it is necessary to apply the general anti-tax avoidance rules, it may start general investigation procedures for anti-tax avoidance and adopt corresponding measures for subsequent administration. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may not be able to obtain certain treaty benefits on dividends paid to us by our subsidiary in mainland China through our Hong Kong Subsidiary.”
On February 3, 2015, the State Administration of Taxation issued a Public Notice 2015 No.7, or Public Notice 7. Under Public Notice 7, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests in a mainland China “resident enterprise” or other taxable assets indirectly by disposing of the equity interests in an overseas holding company, the non-resident enterprise, being the transferor, may be subject to mainland China enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. In addition, Public Notice 7 provides clear criteria on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the “indirect transfer” as they have to make self-assessment on whether the transaction should be subject to mainland China tax and to file or withhold the mainland China tax accordingly. Circular 37 provides certain changes to the current withholding regime and amends certain provisions in Public Notice 7. There is little guidance and practical experience as to the application of Public Notice 7 or Circular 37. Where non-resident investors were involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose, we and our non-resident investors may become at risk of being taxed under Public Notice 7 and may be required to expend valuable resources to comply with Public Notice 7 or Circular 37 or to establish that we should not be taxed under Public Notice 7 or Circular 37. The PRC tax authorities have the discretion under Circular 59, Public Notice 7 or Circular 37 to make adjustments to the taxable