Company: XTKG
Filing Date: 2025-04-25
Form Type: 20-F
Source: 0001213900-25-035626
Chunk: 101

Company: X3 Holdings Co., Ltd.
Filing Date: 2025-04-25
Form: 20-F
Item: Item 4
Chunk 101
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, operating results or cash flows. Regardless of the outcome, litigation can have an adverse impact on
us because of defense and settlement costs, diversion of management resources and other factors.

Government Regulation Relating to Our Business

The following sets forth a summary of the major
laws and regulations that affect our business activities:

Regulations Related to Foreign Investment

Investment activities in China
by foreign investors are principally governed by the Catalogue for the Guidance of Foreign Investment Industries, which was promulgated
by MOFCOM and the National Development and Reform Commission, as amended from time to time. Industries listed in the catalogue are divided
into three categories: encouraged, restricted and prohibited. Industries not listed in the catalogue are generally open to foreign investment
unless specifically restricted by other PRC regulations. Establishment of wholly foreign-owned enterprises is generally allowed in encouraged
industries. For some restricted industries, foreign investors can only conduct investment activities through equity or contractual joint
ventures, while in some cases PRC partners are required to hold the majority interests in such joint ventures. In addition, projects in
the restricted category are subject to higher-level governmental approvals. Foreign investors are not allowed to invest in industries
in the prohibited category.

Regulations Relating to PRC Information
Technology Service Industry

According to the Catalog on
Foreign Invested Industries (2017 Revision) issued by the National Development and Reform Commission and the Ministry of Commerce, IT
services fall into the category of industries in which foreign investment is encouraged. In 2018, The National Development and Reform
Commission and the Ministry of Commerce launched Special Administrative Measures for Access of Foreign Investment (Negative List) (Version
2018)(“the 2018 Negative List”) to replace part of the Catalog on Foreign Invested Industries (2017 Revision) in respect of
the category of industries in which foreign investment is restricted or prohibited, and foreign investment in IT services is neither restricted
nor prohibited according to the 2018 Negative List. The State Council has promulgated several notices since 2000 to launch favorable policies
for IT services, such as preferential tax treatments and credit support.

Under rules and regulations
promulgated by various Chinese government agencies, enterprises that have met specified criteria and are recognized as software enterprises
by the relevant government authorities in China are entitled to preferential treatment, including financing support, preferential tax
rates, export incentives, discretion and flexibility in determining employees’ welfare benefits and remuneration. Software enterprise
qualifications are subject to annual