Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 10

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 3
Chunk 10
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 of its board of directors.
For more details about the employee welfare fund, see “ Item 3 Key Information - D. Risk Factors - Risks Related to Doing
Business in China - Failure to make adequate contributions to various employee benefits plans as required by PRC regulations may subject
us to penalties.” Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate
future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except
in the event of liquidation. In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax at
a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under treaties
or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises
are tax resident. Pursuant to the tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding
tax rate in respect to the payment of dividends by a PRC company to a Hong Kong resident enterprise may be reduced to 5% from a standard
rate of 10%, if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Under the Notice of the
State Taxation Administration on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated in 2009, the
taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include, but are not limited to:
(i) the taxpayer must be the beneficial owner of the relevant dividends, and (ii) the corporate shareholder to receive dividends from
the PRC subsidiaries must have met the direct ownership thresholds during the twelve consecutive months preceding the receipt of the dividends.
Further, the State Taxation Administration, or the STA, promulgated the Announcement of the Certain Issues with Respect to the “ Beneficial
Owner” in Tax Treaties in 2018, which sets forth certain detailed factors in determining “beneficial owner” status,
and specifically, if an applicant’s business activities do not constitute substantive business activities, the applicant will not
qualify as a “beneficial owner”. Furthermore, the Administrative Measures for Non-resident Taxpayers to Enjoy Treatment under
Treaties, which became effective in January 2020, require non-resident enterprises to determine whether they are qualified to enjoy the
preferential tax treatment under the tax