Company: ZDAN
Filing Date: 2025-02-18
Form Type: DRS/A
Source: 0001683168-25-001085
Chunk: 301

Company: Zerolimit Technology Holding Co. Ltd.
Filing Date: 2025-02-18
Form: DRS/A
Chunk 301
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 as improvements in existing software. These costs primarily include salaries, contract
services and supplies.

We follow Financial Accounting Standards Board
(FASB) ASC 985 to account for software development costs incurred for external use software. ASC985 requires all development costs to
establish the technological feasibility of external-use software to be expensed as incurred. Development costs incurred after establishing
technological feasibility to produce the ‘product master’, referred to as ‘production costs’, are capitalized
to the extent recoverable by the net realizable value of the software product until the product is available for general release.

We follow ASC985's requirements to expense all
software development costs before technological feasibility is established. Only software development costs after establishing technological
feasibility, which meet the software development costs capitalization criteria, are capitalized.

Value added tax (“VAT”)

Revenue represents the invoiced value of goods
and service, net of VAT. The VAT is based on gross sales price and VAT rates range up to 17%, depending on the type of products sold
or service provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their
output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. All of the VAT returns filed by
the Company’s subsidiaries in PRC remain subject to examination by the tax authorities for five years from the date of filing.

Income taxes

Cayman Islands

The Company was incorporated in the Cayman Islands
and is not subject to tax on income or capital gains under the laws of Cayman Islands. Additionally, the Cayman Islands does not impose
a withholding tax on payments of dividends to shareholders.

| F-16 |

BVI

Zerolimit Digital Technology Limited, Zerolimit
Excellence Limited, Zerolimit Power Limited and Zerolimit Virtue Limited are incorporated in the British Virgin Islands and are not subject
to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities
to their shareholders, no British Virgin Islands withholding tax will be imposed.

Hong Kong

Zerolimit Technology Holding Co., Ltd. is incorporated
in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted
in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions
for Hong Kong profit tax as there were no