Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 14

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 3
Chunk 14
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 the US-Chinatrade tariffs will have pressures on gross margins of our plastic and electronic operations.

Table of Contents

If we cannot maintain stability in our gross margins, our operating results could suffer, dividend payments to shareholders may be decreased or eliminated, our financial position may be harmed and our stock price may fall.

We believe we were a passive foreign investment company, or “ PFIC,” for our fiscal year ended March 31, 2025 under U. S. income tax laws and may be a PFIC for years after fiscal 2025. If we were a PFIC in fiscal 2025, or are a PFIC in later years, U. S. investors could suffer adverse U. S. federal income tax consequences in such years.

The determination of whether we are a passive foreign investment company, or PFIC, in any taxable year is made on an annual basis after the close of that year and depends on the composition of our income and the nature and value of our assets. Specifically, we will be classified as a PFIC if, after applying relevant look-throughrules with respect to the income and assets of subsidiaries, either (i) 75% or more of our gross income for such taxable year is passive income, or (ii) 50% or more of the value of our assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that either produce passive income or are held for the production of passive income (the “ PFIC asset test”).

We believe that we were a PFIC for our year ended on March 31, 2025 and may also be a PFIC in subsequent tax years. If we are a PFIC for any year during a U. S. Holder’s holding period of our common shares, then such U. S. Holder generally could be subject to adverse U. S. tax consequences including the requirement to treat any “excess distribution” received on our common shares, or any gain realized upon a disposition of such common shares, as ordinary income and to pay an interest charge on a portion of such distributions or gain.

Because of the complexity of the issues regarding our classification as a PFIC, U. S. investors are urged to consult their own tax advisors for guidance as to our PFIC status. For further discussion of the adverse U. S. federal income tax consequences arising from the classification as a PFIC, please see “ United States Federal Income Tax - Passive Foreign Investment Company (PFIC)” in ITEM 10