Company: DTSQ
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001641172-25-001417
Chunk: 230

Company: DT Cloud Star Acquisition Corp
Filing Date: 2025-03-31
Form: 10-K
Item: Item 1A
Chunk 230
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 requirements of the above-mentioned
regulations and other relevant rules to complete such transactions could be time-consuming. These regulations will limit our ability
to negotiate various terms of a possible business combination with a PRC target company, including aspects of the initial consideration,
contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of
assets and liabilities. Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, we may not
be able to negotiate a transaction with terms that will satisfy our investors and protect our shareholders’ interests in an acquisition
of a PRC target company. Furthermore, any required approval processes, including obtaining approval from MOFCOM, any other relevant PRC
governmental authorities or their respective local counterparts may delay or inhibit our ability to complete such transactions, which
could affect our ability to expand our business or maintain our market share.

Enhanced
scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue
in the future. 

The
PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular,
equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular
698, which became effective in January 2008, and Circular 7 in replacement of some of the existing rules in Circular 698, which became
effective in February 2015.

Under
Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC
“resident enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise,
being the transferor, may be subject to PRC corporate income tax if the indirect transfer is considered to be an abusive use of company
structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at
a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident
enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable
adjustment to the taxable income of the transaction.

In
February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has