Company: KPEA
Filing Date: 2025-01-14
Form Type: 10-K
Source: 0001493152-25-002124
Chunk: 690

Company: Kun Peng International Ltd.
Filing Date: 2025-01-14
Form: 10-K
Item: Item 1A
Chunk 690
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 U.S. and China,
and our PRC tax may not be creditable against our U.S. tax.

69

We
face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

On
February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties
by Non-Tax Resident Enterprises, or SAT Bulletin 7, which came into effect on the same day, revised in October 2017 and December 2017.
SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign
intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase
and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee
(or other person who is obligated to pay for the transfer) of taxable assets, as such persons need to determine whether their transactions
are subject to these rules and whether any withholding obligation applies.

On
October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-Resident
Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017, and revised in June 2018. The SAT Bulletin
37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.

Where
a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which
is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable
assets, may report such Indirect Transfer to the relevant tax authority. 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 pays 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. Both the transferor and the transferee