Company: ZDAN
Filing Date: 2025-01-10
Form Type: DRS/A
Source: 0001683168-25-000168
Chunk: 251

Company: Zerolimit Technology Holding Co. Ltd.
Filing Date: 2025-01-10
Form: DRS/A
Chunk 251
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 income subject to withholding at source is derived by a non-PRC resident enterprise in instalments,
the instalments may first be treated as recovery of costs of previous investments. Upon recovery of all costs, the tax amount to be withheld
must then be computed and withheld.

There is uncertainty as
to the application of Circular 7 and Circular 37. Circular 7 and Circular 37 may be determined by the PRC tax authorities to be applicable
to transfers of our shares that involve non-resident investors, if any of such transactions were determined by the tax authorities to
lack a reasonable commercial purpose.

As a result, we and our
non-resident investors in such transactions may become at risk of being taxed under Circular 7 and Circular 37, and we may be required
to comply with Circular 7 and Circular 37 or to establish that we should not be taxed under the general anti-avoidance rule of the
EIT Law. This process may be costly and have a material adverse effect on our financial condition and results of operations.

Value-added Tax

Under the Circular on Comprehensively
Promoting the Pilot Program of the Collection of Value-added Tax to Replace Business Tax, or Circular 36, which was promulgated by the
Ministry of Finance and the SAT on March 23, 2016, became effective on May 1, 2016 and as amended on July 1, 2017, January
1, 2018 and April 1, 2019, entities and individuals engaging in the sale of services, intangible assets or fixed assets within the
territory of the PRC are required to pay value added tax, or VAT, instead of business tax.

According to the Circular
36, our mainland China subsidiary, the VIE and its subsidiary are subject to VAT, at a rate of 6% to 17% on proceeds received from customers
and are entitled to a refund for VAT already paid or borne on the goods purchased by it and utilized in the production of goods or provisions
of services that have generated the gross sales proceeds.

According to the Circular
of the Ministry of Finance and the SAT on Adjusting Value-added Tax Rates, promulgated on April 4, 2018 and effective since May 1,
2018, where a taxpayer engages in a taxable sales activity for the value-added tax purpose or imports goods, the previous applicable
17% tax rates are lowered to 16%.

According to the Circular
on Policies