Company: ILAG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001641172-25-006445
Chunk: 77

Company: Intelligent Living Application Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 77
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uing the Measures for the Administration
of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements.

  48  

On February 3, 2015, the SAT issued the Public Notice
Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or the SAT Public
Notice 7. The SAT Public Notice 7 extends its tax jurisdiction to cover not only where a non-resident enterprise transfers the equity
interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, or an Indirect
Transfer, but also to transactions involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding
company. The SAT Public Notice 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to
pay for the transfer) of taxable assets. Where a non-resident enterprise transfers a taxable asset 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 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.
Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and
the transferor fails to pay the taxes.

On October 17, 2017, the SAT issued the Public Notice
on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Public Notice 37, which came into effect
on December 1, 2017. According to SAT Public Notice 37, where the non-resident enterprise fails to declare its tax payable pursuant to
Article 39 of the EIT Law, the tax authority may order it to pay its tax due within required time limits, and the