Company: ILAG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001641172-25-006445
Chunk: 36

Company: Intelligent Living Application Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 36
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 regulations or changes in laws and regulations in both the
United States and China could affect our ability to list our ordinary shares on Nasdaq, which could materially impair the market for and
market price for our securities.

Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

The PRC tax authorities have enhanced their scrutiny
over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise,
by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008,
and Circular 698 was abolished and void as of December 1, 2017.

Under Circular 698, where a non-resident enterprise
conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly
by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject
to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial
purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular 698 also provides
that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price
lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the
transaction.

In February 2015, the SAT issued Circular 7 to replace
the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different from
that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also
transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition,
Circular 7 provides clearer criteria than 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. 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