Company: KPEA
Filing Date: 2025-01-14
Form Type: 10-K
Source: 0001493152-25-002124
Chunk: 517

Company: Kun Peng International Ltd.
Filing Date: 2025-01-14
Form: 10-K
Item: Item 1
Chunk 517
---
 any PRC government authority takes the position that there is non-compliance with the taxation,
marketing, telecommunication, or other rules by our PRC subsidiary or consolidated affiliated entity, they may be exposed to penalties
from PRC government authorities, in which case the operation and financial conditions of our PRC subsidiary or consolidated affiliated
entity may be adversely affected.

Under
the Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely
result in unfavorable tax consequences to us and our non-PRC stockholders.

On
March 16, 2007, the National People’s Congress of China passed the EIT Law, and on November 28, 2007, the State Council of China
passed its implementing rules, which took effect on January 1, 2008. Under the EIT Law, an enterprise established outside of China with
“de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated
in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto
management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties”
of the enterprise.

On
April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment
Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice,
further interpreting the application of the EIT Law and its implementation non-Chinese enterprise or group controlled offshore entities.
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 chops, board and shareholder minutes are kept in China;
and (iv) at least half of its directors with voting rights or senior management often resident 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. However, it