Company: GLXG
Filing Date: 2025-10-24
Form Type: 20-F
Source: 0001213900-25-102144
Chunk: 20

Company: Galaxy Payroll Group Ltd
Filing Date: 2025-10-24
Form: 20-F
Item: Item 3
Chunk 20
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 the current practice of the Inland Revenue Department of Hong Kong,
no tax is payable in Hong Kong in respect of dividends paid by us.

According to the current
PRC regulations, our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings, and our PRC subsidiary
is only permitted to pay dividends to Galaxy Payroll (China) only out of their accumulated profits, if any, determined in accordance with
Chinese accounting standards and regulations. In addition, our subsidiary in China is required to set aside at least 10% of its after-tax
profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory
reserve can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of
our PRC subsidiary, the reserve funds are not distributable as cash dividends except in the event of liquidation. Therefore, our PRC subsidiary’s
ability to distribute dividends and amount to be distributed, if any may be greatly limited.

In addition, there can be
no assurance that in the future the PRC government will not intervene or impose restrictions on our Hong Kong subsidiary, Galaxy Payroll
(HK)’s ability to transfer or distribute cash/assets to entities outside of Hong Kong, any limitation on the ability of Galaxy Payroll
(HK) to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

PRC laws and regulations related to our
current business operations are sometimes vague and uncertain and any changes in such laws and regulations and interpretations of which
may impair our ability to operate profitably.

Although Galaxy Payroll BVI
has complete ownership of our Operating Entities and currently does not have or intends to have any contractual arrangement to establish
a VIE structure with any entity or individual, the Group may still be subject to certain legal and operational risks associated with our
Operating Entities being based in Hong Kong and PRC and having most of its operations to date in Hong Kong and PRC. There are substantial
uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations
related to our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and
regulations are sometimes vague and may be subject to future changes, and their