Company: DDC
Filing Date: 2025-07-22
Form Type: F-3
Source: 0001213900-25-066338
Chunk: 119

Company: DDC Enterprise Ltd
Filing Date: 2025-07-22
Form: F-3
Chunk 119
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 Relating to Enterprise Income Tax on
Transfer of Assets between Non-resident Enterprises, which took effective on February 3, 2015, to replace the rules relating to indirect
transfers in SAT Circular 698. SAT Circular 7 has introduced a new tax regime that is significantly different from that under SAT Circular
698. SAT Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under SAT Circular 698 but also transactions
involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, SAT
Circular 7 provides clearer criteria than SAT Circular 698 on how to assess reasonable commercial purposes and has introduced safe
harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Circular 7 also
brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable
assets. Where a non-resident enterprise conducts an “indirect 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 corporate 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.

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According to SAT Circular
37, the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, which was issued by the SAT
on October 17, 2017 and took effect on December 1, 2017 and was most-recently amended on June 15, 2018, the balance after deducting the
equity net value from the equity transfer income shall be the taxable income amount for equity transfer income. Equity transfer income
shall mean the consideration collected by the equity transfer or from the equity transfer, including various