Company: PAVS
Filing Date: 2025-08-04
Form Type: 20-F
Source: 0001929980-25-000590
Chunk: 42

Company: Paranovus Entertainment Technology Ltd.
Filing Date: 2025-08-04
Form: 20-F
Item: Item 3
Chunk 42
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 in adverse U. S. federal income tax consequences to U. S. holders of our Class A Ordinary Shares.

A non-U. S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of “passive” income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). Based on our current and expected income and assets (taking into account the expected cash proceeds and our market capitalization), we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our Class A Ordinary Shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our Class A Ordinary Shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in our initial public offering. If we were to be or become a PFIC for any taxable year during which a U. S. Holder holds our Class A Ordinary Shares, certain adverse U. S. federal income tax consequences could apply to such U. S. Holder. See “ Taxation - Passive Foreign Investment Company Consequences.”

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The economic substance legislation of the Cayman Islands may adversely impact the Company or its operations.

The Cayman Islands, together with several other non-European Union jurisdictions, have introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Law, 2018 (the “ ES Law”) and issued related Regulations and Guidance Notes came into force in the