Company: NCL
Filing Date: 2025-01-29
Form Type: S-1/A
Source: 0001575872-25-000097
Chunk: 33

Company: Northann Corp.
Filing Date: 2025-01-29
Form: S-1/A
Chunk 33
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 or, if the average of the corporation’s
earnings before taxes on income and before interest expenses for the two preceding fiscal years were less than the average of the corporation’s
interest expenses for such fiscal years, then the corporation’s current assets must equal at least 1 and 1/4 times its current liabilities.

Benchwick, Cedar Modern Limited, and Raleigh Industries
Limited, our Hong Kong subsidiaries, are permitted, under the laws of Hong Kong, to provide funding to the Company through dividend distribution
out of its profits. Under the current practices of the Hong Kong Inland Revenue Department, no tax is payable in Hong Kong in respect
of dividends paid to the Company as a Nevada corporation.

According to the PRC Company Law and the Foreign Investment
Law, each of Crazy Industry, Marco, Ringold and NCP, 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% 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