Company: QSJC
Filing Date: 2025-03-26
Form Type: 10-K
Source: 0001683168-25-001892
Chunk: 17

Company: TANCHENG GROUP CO., LTD.
Filing Date: 2025-03-26
Form: 10-K
Item: Item 1
Chunk 17
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other distributions on equity from our PRC subsidiaries for its cash requirements.

Our Nevada holding company, Tancheng Group, has
no material assets other than ownership of equity interests in its subsidiaries. As a result, it has no independent means of generating
revenue and may rely on dividends and other distributions on equity from our PRC operating subsidiaries for its cash requirements. Our
PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our
PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance
with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries, as a Foreign Invested Enterprise, or FIE, is
required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits
if the aggregate balance of the common reserve has already accounted for over 50 percent of its registered capital. These reserves are
not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the
debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to
distribute dividends or other payments to their respective shareholders could materially and adversely limit the Company’s ability
to grow, make investments or acquisitions that could be beneficial to the Company’s business, pay dividends or otherwise fund and
conduct the Company’s business.

In addition, the Enterprise Income Tax Law and
its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies
to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government
and governments of other countries or regions where the non-PRC resident enterprises are incorporated.

 12 

Non-compliance with labor-related laws and
regulations of the PRC could have an adverse impact on the Company’s financial condition and results of operation.

Our PRC subsidiaries have been subject to stricter
regulatory requirements in terms of entering into labor contracts with their employees and paying various statutory employee benefits,
including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance
to designated government agencies for the benefit of their employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract Law,
that became effective