Company: RAYA
Filing Date: 2025-09-29
Form Type: 424B5
Source: 0001185185-25-001296
Chunk: 146

Company: Erayak Power Solution Group Inc.
Filing Date: 2025-09-29
Form: 424B5
Chunk 146
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 the rate of 25%
on its worldwide income. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise controlled by a
Chinese natural person. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

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If the PRC tax authorities determine that we are
a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow.
First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income
tax reporting obligations. In our case, this would mean that income such as non-China source income would be subject to PRC enterprise
income tax at a rate of 25%. Currently, we do not have any non-China source income, as we conduct our sales in China. However, under the
EIT Law and its implementing rules, dividends paid to us from our PRC subsidiary would be deemed as “qualified investment income
between resident enterprises” and therefore qualify as “tax-exempt income” pursuant to clause 26 of the EIT Law. Second,
it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a
situation in which the dividends we pay with respect to our ordinary shares, or the gain our non-PRC shareholders may realize from the
transfer of our ordinary shares, may be treated as PRC-sourced income and may therefore be subject to a 10% PRC withholding tax. The EIT
Law and its implementing regulations are, however, relatively new and ambiguities exist with respect to the interpretation and identification
of PRC-sourced income, and the application and assessment of withholding taxes. If we are required under the EIT Law and its implementing
regulations to withhold PRC income tax on dividends payable to our non-PRC shareholders, or if non-PRC shareholders are required to pay
PRC income tax on gains on the transfer of their ordinary shares, our business could be negatively impacted and the value of your investment
may be materially reduced. Further, if we were treated as a “resident enterprise” by PRC tax authorities, we would be subject
to taxation in both China and such countries in which we have taxable income, and our PRC tax may not be creditable against such other
taxes.

We may be exposed to liabilities under the Foreign Corrupt Practices Act