Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 55

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 3
Chunk 55
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 or (ii) the equity transfer costs actually paid at the time of acquisition of such equity to the
original transferor of the said equity. Where there is reduction or appreciation of value during the equity holding period, and the gains
or losses may be confirmed pursuant to the rules of the finance and tax authorities of the State Council, the equity net value shall be
adjusted accordingly. When an enterprise computes equity transfer income, it shall not deduct the amount in the shareholders’ retained
earnings such as undistributed profits etc., of the investee enterprise, which may be distributed in accordance with the said equity.
In the event of partial transfer of equity under multiple investments or acquisitions, the enterprise shall determine the costs corresponding
to the transferred equity in accordance with the transfer ratio, out of all costs of the equity.

Under SAT Circular 7 and the
Law of the People’s Republic of China on the Administration of Tax Collection promulgated by SCNPC on September 4, 1992 and newly
amended on April 24, 2015 (the “ Tax Collection Law”), in the case of an indirect transfer, entities or individuals obligated
to pay the transfer price to the transferor shall act as withholding agents. According to SAT Circular 7, where the transferee fails to
withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time
limit. SAT Circular 37 further elaborates the relevant implemental rules regarding the calculation, reporting and payment obligations
of the withholding tax by the non-resident enterprises. In addition, the tax authority may also hold the withholding agents liable and
impose a penalty of ranging from 50% to 300% of the unpaid tax on them. The penalty imposed on the withholding agents may be reduced or
waived if the withholding agents have submitted the relevant materials in connection with the indirect transfer to the PRC tax authorities
in accordance with SAT Circular 7.

We may face uncertainties
on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the
transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident
enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiary to assist
in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations