Company: NCL
Filing Date: 2025-09-26
Form Type: S-1
Source: 0001575872-25-000602
Chunk: 35

Company: Northann Corp.
Filing Date: 2025-09-26
Form: S-1
Chunk 35
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 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% of its registered capital. These reserves are not distributable as cash dividends. Furthermore,
under the EIT Law, which became effective in January 2008, the maximum tax rate for the withholding tax imposed on dividend payments from
PRC foreign invested companies to their overseas investors that are not regarded as a “resident” for tax purposes is 20%.
The rate was reduced to 10% under the Implementing Regulations for the EIT Law issued by the State Council. However, a lower withholding
tax rate might be applied if there is a tax treaty between China and the jurisdiction of a foreign holding company. Mainland China and
the Hong Kong Special Administrative Region entered into a tax arrangement to avoid double taxation and prevent fiscal evasion with respect
to income tax. The tax arrangement applies where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise,
directly holds at least 25% of equity interests in a PRC enterprise. In that case the withholding tax rate in respect to the payment of dividends by
such PRC enterprise to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval
of the PRC local tax authority. Accordingly, our only Hong Kong subsidiary that has subsidiaries, is able to enjoy the 5% withholding
tax rate for the dividends it receives from its PRC subsidiaries (Crazy Industry, Ringold and Marco if Benchwick) satisfies
the conditions prescribed in relevant tax rules and regulations and obtains the required approvals. However, if Benchwick is considered
a non-beneficial owner for purposes of the tax arrangement, any dividends paid to it by its PRC subsidiaries directly would not qualify
for the preferential dividend withholding tax rate of 5%, but rather would be subject to a rate of 10%.

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In addition, in response to the persistent capital
outflow and the Renminbi’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China
(“PBOC”) and the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures,
including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments
and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and