Company: NCL
Filing Date: 2025-01-29
Form Type: S-1/A
Source: 0001575872-25-000097
Chunk: 51

Company: Northann Corp.
Filing Date: 2025-01-29
Form: S-1/A
Chunk 51
---
 applicable taxes, currently at a
rate of 10% for the transfer of equity interests in a PRC resident enterprise.

| 21 |

According to SAT Circular
37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the EIT Law, the tax authority may order
it to pay the tax due within the required time limits, and the non-resident enterprise shall declare and pay the tax payable within such
time limits specified by the tax authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before
the tax authority orders it to do so within the required time limits, it shall be deemed that such enterprise has paid the tax in time.

We face uncertainties
as to the reporting and assessment of reasonable commercial purposes and future transactions where PRC taxable assets are involved, such
as offshore restructuring, selling shares of our offshore subsidiaries, and investments. In the event of being assessed as having no reasonable
commercial purposes in an indirect transfer transaction, we may be subject to filing obligations or taxed if we are a transferor in such
transactions, and may be subject to withholding obligations (to be specific, a 10% withholding tax for the transfer of equity interests)
if we are a transferee in such transactions, under SAT Circular 7 and SAT Circular 37. Our PRC subsidiary may be requested to assist in
the filing under the SAT circulars for share transfer by investors who are non-PRC resident enterprises. As a result, we may be required
to expend valuable resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets
to comply with these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect
on our financial condition and results of operations.

The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the “M&A Rules,” and recently adopted regulations and rules concerning
mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if