Company: SCAG
Filing Date: 2025-11-12
Form Type: 20-F
Source: 0001213900-25-109190
Chunk: 50

Company: Scage Future
Filing Date: 2025-11-12
Form: 20-F
Item: Item 3
Chunk 50
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 supplemented certain previous rules under the Notice on Strengthening
Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (the “ Circular 698”), issued
by the State Administration of Taxation on December 10, 2009. Circular 7 sets out a wider scope of indirect transfer of PRC assets
that might be subject to PRC enterprise income tax. Circular 7 also includes detailed guidelines regarding when such indirect transfer
is considered to lack a bona fide commercial purpose and thus regarded as avoiding PRC tax. On October 17, 2017, the SAT issued
the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises (the “ SAT Circular 37”),
which came into effect on December 1, 2017 and was amended on June 15, 2018. SAT Circular 37 further clarifies the practices
and procedures for withholding non-resident enterprise income tax.

The conditional reporting
obligation of the non-PRC investor under Circular 698 is replaced by a voluntary reporting by the transferor, the transferee or the underlying
PRC resident enterprise transferred. Using a “substance over form” principle, PRC tax authorities may disregard the existence
of the overseas holding company if the company 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, currently
at a rate of 10%, and the transferee has an obligation to withhold tax from the sale proceeds.

Gains from the sale of shares
by investors through a public stock exchange are not subject to the PRC enterprise income tax pursuant to Circular 7 where such shares
were acquired in a transaction through a public stock exchange.

The application of Circular
7 and the SAT Circular 37 shall be determined in accordance with the laws and regulations in force at the time. PRC tax authorities may
determine that Circular 7 and the SAT Circular 37 are applicable to offshore restructuring transactions or sale of the shares of offshore
subsidiaries where non-resident enterprises, as the transferors, were involved. PRC tax authorities may pursue such non-resident enterprises
with respect to a filing regarding the transactions and request the PRC Subsidiaries to assist in the filing.

As a result, our non-resident
subsidiaries in such transactions may risk being subject to filing