Company: KPEA
Filing Date: 2025-01-14
Form Type: 10-K
Source: 0001493152-25-002124
Chunk: 660

Company: Kun Peng International Ltd.
Filing Date: 2025-01-14
Form: 10-K
Item: Item 1A
Chunk 660
---
 not entered into based on arm’s length negotiations. As a result, they may adjust our income
and expenses for PRC tax purposes in the form of a transfer pricing adjustment. Such an adjustment may require that we pay additional
PRC taxes plus applicable penalties and interest, if any.

Our
current corporate structure and business operations may be substantially affected by the newly enacted Foreign Investment Law.

On
March 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, which took effect on January 1, 2020. Since
it is relatively new, substantial uncertainties exist in relation to its interpretation and implementation. The Foreign Investment Law
does not explicitly classify variable interest entities that are controlled through contractual arrangements as foreign invested enterprises
even if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under the definition
of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws,
administrative regulations, or the State Council. Therefore, it still leaves leeway for future laws, administrative regulations, or provisions
of the State Council to provide for contractual arrangements as a form of foreign investment, at which time it will be uncertain whether
our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment in the PRC, and
if they are deemed to be in violation, how our contractual arrangements should be dealt with.

The
Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate
in industries specified as either “restricted” or “prohibited” from foreign investment in the Special Administrative
Measures (Negative List) for Foreign Investment Access jointly promulgated by MOFCOM and the NDRC that took effect in July 2020. The
Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries
will require market entry clearance and other approvals from relevant PRC government authorities. If our control over our VIE through
contractual arrangements is deemed to be foreign investment in the future, and if any business of our VIE is “restricted”
or “prohibited” from foreign investment under the “negative list” effective at the time, we may be deemed to
be in violation of the Foreign Investment Law, the contractual arrangements that allow us to have control over our VIE may be deemed
to be invalid and illegal, and we may be required to unwind such contractual arrangements