Company: QSJC
Filing Date: 2025-03-26
Form Type: 10-K
Source: 0001683168-25-001892
Chunk: 103

Company: TANCHENG GROUP CO., LTD.
Filing Date: 2025-03-26
Form: 10-K
Item: Item 1A
Chunk 103
---
If we are classified as a PRC resident enterprise
for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the PRC Enterprise Income Tax Law and its
implementation rules, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered
a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation
rules define the term “de facto management body” as the body that exercises full and substantial control and overall management
over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or
SAT, issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto
management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular applies
only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners,
the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body”
text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated
enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de
facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following
conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s
financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s
primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC;
and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

We believe that our company is not a PRC resident
enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities
and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities
determine that our