Company: ILAG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001641172-25-006445
Chunk: 37

Company: Intelligent Living Application Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 37
---
 transfer” by transferring the taxable assets indirectly by disposing of the
equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity
which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over
form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial
purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect
transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated
to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.

  26  

We face uncertainties on the reporting and consequences
on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our Company
by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a
filing or the transferees with respect to withholding obligation and request our PRC subsidiary to assist in the filing. As a result,
we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular
59 and Circular 7, and may be required to expend valuable resources to comply with Circular 59 and Circular 7 or to establish that we
and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial
condition and results of operations.

The PRC tax authorities have the discretion under
SAT Circular 59, and Circular 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the
taxable assets transferred and the cost of investment. Although we currently have no specific plans to pursue any acquisitions in China
or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered
a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income
of the transactions under SAT Circular 59 and Circular 7, our income tax costs associated with such potential acquisitions will be increased,
which may have an adverse effect on our financial condition and results of operations.

Substantial uncertainties