Company: ATMCW
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001641172-25-004801
Chunk: 1768

Company: ALPHATIME ACQUISITION CORP
Filing Date: 2025-04-15
Form: 10-K
Item: Item 1A
Chunk 1768
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 in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became
effective in February 2015.

Under
Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC
“resident enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise,
being the transferor, may be subject to PRC corporate income tax, if the indirect transfer is considered to be an abusive use of company
structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at
a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident
enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable
adjustment to the taxable income of the transaction.

51

In
February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced
a new tax regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect
transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer
of a foreign intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable
commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public
securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated
to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring
the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being
the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority
such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the
overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring
PRC tax. As a result, gains