Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 151

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 10
Chunk 151
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 we may be required to withhold a 10% withholding
tax from dividends we pay to our shareholders that are Non-Resident Enterprises, including the holders of our ADSs. Such 10% tax rate
could be reduced by applicable tax treaties or similar arrangements between China and the jurisdiction of our shareholders. For example,
for shareholders eligible for the benefits of the tax treaty between China and Hong Kong, the tax rate is reduced to 5% for dividends
if relevant conditions are met. In addition, Non-Resident Enterprise shareholders (including our ADS holders) may be subject to a 10%
PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within
the PRC. It is unclear whether our non-PRC individual shareholders (including our ADS holders) would be subject to any PRC tax on dividends
or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax
were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable
tax treaty. However, it is also unclear whether non-PRC shareholders of XChange TEC. INC would be able to claim the benefits of any tax
treaties between their country of tax residence and the PRC in the event that XChange TEC. INC is treated as a PRC resident enterprise.

Provided that our Cayman Islands holding company,
XChange TEC. INC, is not deemed to be a PRC resident enterprise, holders of our ADSs and Class A ordinary shares who are not PRC residents
will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares
or ADSs. However, under Circular 7, where a Non-Resident Enterprise conducts an “indirect transfer” by transferring taxable
assets, including, in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an
overseas holding company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned
such taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle,
the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and