Company: RAYA
Filing Date: 2025-08-01
Form Type: 424B5
Source: 0001213900-25-070321
Chunk: 146

Company: Erayak Power Solution Group Inc.
Filing Date: 2025-08-01
Form: 424B5
Chunk 146
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 Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application
of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or group. Pursuant to the Notice, an enterprise
incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically
incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly
in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and
properties, accounting books, corporate stamps, board and shareholder minutes are kept in China; and (iv) all of its directors with voting
rights or senior management reside in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide
income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC shareholders. Because substantially all of
our operations and senior management are located within the PRC and are expected to remain so for the foreseeable future, we may be considered
a PRC resident enterprise for enterprise income tax purposes and therefore subject to the PRC enterprise income tax at the rate of 25%
on its worldwide income. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise controlled by a
Chinese natural person. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

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If the PRC tax authorities determine that we are
a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow.
First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income
tax reporting obligations. In our case, this would mean that income such as non-China source income would be subject to PRC enterprise
income tax at a rate of 25%. Currently, we do not have any non-China source income, as we conduct our sales in China. However, under the
EIT Law and its implementing rules, dividends paid to us from our PRC subsidiary would be deemed as “qualified investment income
between resident enterprises” and therefore qualify as “tax-exempt income” pursuant to clause 26 of the EIT Law. Second,
it is possible that future guidance