Company: TME
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0000950170-25-056949
Chunk: 5

Company: Tencent Music Entertainment Group
Filing Date: 2025-04-23
Form: 20-F
Item: Item 3
Chunk 5
---
. Financial Information — 8.A. Consolidated Statements and Other Financial Information — Dividend Policy.”

For the purpose of illustration, the below table reflects the hypothetical taxes that might be required to be paid within China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay a dividend in the future:

                                                          Taxation Scenario
                                           Statutory Tax and Standard Rates
Hypothetical pre-tax earnings                                          100%
Tax on earnings at statutory rate of 25%                              (25)%
Net earnings available for distribution                                 75%
Withholding tax at standard rate of 10%*                             (7.5)%
Net distribution to Parent/Shareholders                               67.5%
Note:
* The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise, or FIE, to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax would be applied.
The table above has been prepared under the assumption that all profits of the VIEs will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If in the future, the accumulated earnings of the VIEs exceed the fees paid to our PRC subsidiaries, or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities, we have other tax-planning strategies that can be deployed on a tax neutral basis.
Should all tax planning strategies fail, the VIEs could, as a matter of last resort, make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the VIEs. This would result in the double taxation of earnings: one at the VIE level (for non-deductible expenses) and one at the PRC subsidiary level (for presumptive earnings on the transfer). Such a transfer and the related tax burdens would reduce our after-tax income to approximately 50.6% of the pre-tax income. Our management is of the view that the likelihood that this scenario would happen is remote.
Condensed Consolidating Schedule
The following tables present the summary statements of operations for the V