Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 53

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 3
Chunk 53
---

may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption law may result in severe
criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results
and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed
by companies in which we invest or that we acquire.

Enhanced scrutiny over acquisition transactions
by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

The PRC tax authorities have
enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in
a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing Notice 59 with the Ministry of Finance, which
was partially amended by Notice 109, and SAT Circular 698, which became effective in January 2008, and SAT Circular 7 in replacement
of some of the existing rules in SAT Circular 698, which became effective in February 2015. SAT Circular 698 was fully abolished
by SAT Circular 37 in December 2017.

Under SAT Circular 698, where
a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise”
indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may
be subject to PRC corporate income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable
commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. SAT Circular
698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related
parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable
income of the transaction.

In February 2015, the
SAT issued SAT Circular 7, Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax on
Transfer of Assets between Non-resident Enterprises, which took effective on February 3, 2015, to replace the rules relating to indirect
transfers in SAT Circular 698. SAT Circular 7 has introduced a new tax regime that is