Company: XTKG
Filing Date: 2025-04-25
Form Type: 20-F
Source: 0001213900-25-035626
Chunk: 62

Company: X3 Holdings Co., Ltd.
Filing Date: 2025-04-25
Form: 20-F
Item: Item 3
Chunk 62
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 conduct investigation
or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

We face uncertainty regarding the PRC tax
reporting obligations and consequences for certain indirect transfers of the stock of our operating company.

Pursuant to the Notice on
Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises issued by the PRC State Administration
of Taxation on December 10, 2009, or Circular 698, where a foreign investor transfers the equity interests of a PRC resident enterprise
indirectly by way of the sale of equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company
is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5%; or (ii) does not tax foreign income of
its residents, the foreign investor should report such Indirect Transfer to the competent tax authority of the PRC resident enterprise.
The PRC tax authority will examine the true nature of the Indirect Transfer, and if the tax authority considers that the foreign investor
has adopted an abusive arrangement in order to avoid PRC tax, they will disregard the existence of the overseas holding company and re-characterize
the Indirect Transfer and as a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at the rate of
up to 10%. In addition, the PRC resident enterprise is supposed to provide necessary assistance to support the enforcement of Circular
698. At present, the PRC tax authorities will neither confirm nor deny that they would enforce Circular 698, in conjunction
with other tax collection and tax withholding rules, to make claims against our PRC subsidiary as being indirectly liable for unpaid
taxes, if any, arising from Indirect Transfers by shareholders who did not obtain their shares in the IPO of our shares.

On February 3, 2015, the PRC
State Administration of Taxation issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties
by Non-Tax Resident Enterprises, or SAT Public Notice 7. SAT Public Notice 7 supersedes the rules with respect to the Indirect Transfer
under SAT Circular 698, but does not touch upon the other provisions of SAT Circular 698, which remain in force. SAT Public Notice 7 has
introduced a new tax regime that is significantly different from the previous one under SAT Circular 698. SAT Public Notice