Company: LICN
Filing Date: 2025-04-29
Form Type: 20-F
Source: 0001213900-25-036244
Chunk: 35

Company: Lichen International Ltd
Filing Date: 2025-04-29
Form: 20-F
Item: Item 4A
Chunk 35
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 the purpose of internal reports. The Group does not distinguish revenues, costs and expenses
between segments in its internal reporting, and reports costs and expenses by nature as a whole. Hence, the Group has only one reportable
segment.

Value added tax (“ VAT”)

Revenue represents the invoiced
value of goods and service, net of VAT. The VAT is based on gross sales price and VAT rates range up to 13%, depending on the type of
products sold or service provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers
against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. All of the VAT returns
filed by the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of
filing.

Income tax expenses

The Company follows the liability
method of accounting for income taxes in accordance with ASC 740 (“ ASC 740”), Income Taxes. The Company accounts for current
income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences
exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.

The
Company is not subject to tax on income or capital gain under the current tax laws of U. S. And the Company is subject to tax on income
or capital gain under the tax laws of PRC.

An uncertain tax position
is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination.
The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions
not meeting the “more likely than not” test, no tax benefit is recorded. For the years ended December 31, 2024, 2023 and 2022,
no uncertain tax position is recognized. Penalties and interest incurred related to underpayment of income tax are classified as income
tax expense in the period incurred. No significant penalties or interest