Company: NCL
Filing Date: 2025-09-26
Form Type: S-1
Source: 0001575872-25-000602
Chunk: 52

Company: Northann Corp.
Filing Date: 2025-09-26
Form: S-1
Chunk 52
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. As stipulated in SAT Circular 7, indirect transfers of PRC taxable assets
are considered as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following
situations: i) the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor
and the transferee are both 80% or above directly or indirectly owned by the same party; iii) the percentages in bullet points i) and
ii) shall be 100% if over 50% the share value of a foreign enterprise is directly or indirectly derived from PRC real properties. Furthermore,
SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer)
of taxable assets. Where a non-resident enterprise transfers PRC taxable assets indirectly by disposing of the equity interests of an
overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity
that directly owns the taxable assets, may report such indirect transfer to the relevant tax authority and 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 derived from such indirect transfer may be subject to PRC enterprise income tax, and
the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a
rate of 10% for the transfer of equity interests in a PRC resident enterprise.

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According to SAT Circular
37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the EIT Law, the tax authority may order
it to pay the tax due within the required time limits, and the non-resident enterprise shall declare and pay the tax payable within such
time limits specified by the tax authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before
the tax authority orders it to do so within the required time limits, it shall be deemed that such enterprise has paid the tax in time.

We face uncertainties
as to the reporting and assessment of reasonable commercial purposes and future transactions where PRC taxable assets are involved, such
as offshore restructuring, selling shares of our offshore subsidiaries, and investments. In the event of