To facilitate our sales globally and expand our market reach, two of our entities sold finished goods to eleven of our domestic entities and overseas subsidiaries for onward sale to external customers during the Track Record Period.
Business · p. 166
Our transfer pricing policy for the sale of finished goods requires that prices are determined through negotiation between the transacting parties.
Business · p. 166
This negotiation takes into account various factors, including local market conditions, prices of competitive products and other relevant market dynamics, with the objective of allowing each entity to retain a reasonable profit margin.
During the Track Record Period, our Group conducts intercompany transactions among our PRC entities, its Cambodia manufacturing subsidiary, its CSW HK and L&G HK (the “Hong Kong Trading Entities”) and its U.S. distribution subsidiary in connection with the procurement, manufacturing and sale of decorative planters and other gardening products.
Business · p. 177
We have engaged an independent transfer pricing advisor, Ernst & Young Tax Services Limited, (the “Transfer Pricing Advisor”) to conduct benchmarking studies (the “Benchmarking Study”) on the Covered Transactions, in accordance with the OECD Transfer Pricing Guidelines.
Business · p. 179
The resulting net tax implication at our Group level amounted to approximately RMB69,932 for Dafeng Plastic and RMB573,857 for Lvyoufang, after taking into account applicable tax rates and corresponding relief, USD16,023 for CSW Cambodia and approximately USD104 for the year ended December 31, 2024 and USD553 for the year ended December 31, 2025 for L&G USA.
During the Track Record Period, the amount for intercompany transactions was RMB22,921 million, RMB32,232 million and RMB38,629 million respectively.
Business · p. 165
We have engaged a transfer pricing adviser to review our intra-group transactions.
Business · p. 166
In view of the above, the independent transfer pricing adviser concluded that the Group’s overall intercompany transactions were aligned with arm’s length principle and there were no significant transfer pricing risks during the Track Record Period.
In 2023, 2024 and 2025, the amount for these intra-group cross-border transactions was approximately nil, RMB1.2 million and RMB12.3 million, respectively.
Business · p. 178
To ensure compliance with the applicable transfer pricing tax regulations in the jurisdictions where we operate, we have engaged an independent transfer pricing consultant (the “Transfer Pricing Consultant”), to conduct a transfer pricing review on the aforementioned intra-group cross-border transactions.
Business · p. 178
The weighted average operating profit margin of DDPAI Global for the years 2024 and 2025 was 2.9%, which fell within the reasonable arm’s length range for routine limited-risk distributors, which ranges approximately from 2% to 5%.
During the Track Record Period, our intra-group transactions primarily included purchases and sales of tangible goods (including caffeine and theobromine) between our Company and certain overseas subsidiaries which are principally responsible for the sales and distribution of our products in their respective local markets (the “Covered Transactions”).
Business · p. 175
CSPC Deryang and CSPC Innovation USA were each a limited-risk distributor, while our Company assumes key functions and associated risks, including R&D, production, logistics, sales and marketing, as well as after-sales services.
Business · p. 176
Based on the benchmarking studies, the OMs of CSPC Deryang and CSPC Innovation USA, our subsidiaries involved in the Covered Transactions, were within the Comparable Profit Level Range.
The remaining cross-border transactions, which account for approximately 23% of intra-group activities, were primarily conducted between our Singapore Entities and manufacturing bases.
Business · p. 169
We have engaged an independent transfer pricing consultant (''Transfer Pricing Consultant'') to perform transfer pricing review, including benchmarking studies, to evaluate the transfer pricing arrangements in relation to the above-mentioned intra-group transactions during the Track Record Period.
Business · p. 169
Our Directors, together with the Transfer Pricing Consultant, are of the view that our relevant intra-group transactions were largely conducted on an arm's length basis, and were consistent and in compliance with the relevant transfer pricing regulations in relevant tax jurisdictions and the Organisation for Economic Cooperation and Development Transfer Pricing Guidelines for Multinational Enterprise and Tax Administrations during the Track Record Period in material aspects.
Our operations are managed through subsidiaries in Chinese Mainland and Hong Kong. During the Track Record Period, our intra-group transactions primarily involved the provision of services among our entities in Chinese Mainland and Hong Kong.
Business · p. 166
We have established a comprehensive internal control system for transfer pricing to ensure ongoing compliance with applicable laws and regulations.
Business · p. 167
Based on the review of the consolidated financial statements, our transfer pricing consultant considers that our intra-group transactions during the Track Record Period generally comply with the Transfer Pricing Law and Regulations of the PRC and Hong Kong.
These transactions primarily consist of (i) the sale of inventories including finished goods, work-in-progress and/or raw materials between our Company and our subsidiaries in mainland China and the subsidiaries in Hong Kong and Malaysia, (ii) the sale of equipment between our Company and our subsidiaries in mainland China and the subsidiary in Malaysia, and (iii) the provision of loans between the subsidiaries in Hong Kong and the subsidiaries in Malaysia and the U.S.
Business · p. 141
Based on the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and the regulations of relevant jurisdictions, our Transfer Pricing Advisor concluded that our Group's intra-group transactions complied with the arm's length principle and there is no significant tax risk in our Group's intra-group transaction pricing.
The transaction amounts involved in the processing service acquired from Huangshi Qunli were RMB65.3 million, RMB204.7 million and RMB205.9 million, for FY2023, FY2024 and FY2025, respectively.
Business · p. 154
The transaction amounts involved in the purchase amount from Qunce Hong Kong were RMB64.6 million and RMB267.7 million, for FY2024 and FY2025, respectively.
Business · p. 154
Qunce Hong Kong (群策香港)'s weighted average EBIT margin was 0.85%, which falls within the interquartile range of the three-year weighted average EBIT margins of the comparable companies.
In 2023, 2024 and 2025, our intra-group transactions amounted to RMB6,505.0 million, RMB10,368.5 million and RMB13,268.1 million, respectively.
Business · p. 173
Based on the above analysis, as advised by the Transfer Pricing Consultant, our Directors are of the view that (i) our Group has established reasonable transfer pricing arrangements for the intra-group transactions, (ii) the intra-group transactions were consistent with the arm’s length principle under OECD guidelines in all material aspects and our transfer pricing arrangements did not give rise to compliance issues requiring material adjustment, and (iii) our transfer pricing arrangements should not result in material transfer pricing exposure and the risk of material transfer pricing adjustment is low.
Business · p. 175
During the Track Record Period and up to the Latest Practicable Date, (i) we did not receive any notice or demand from any relevant tax authority in any jurisdiction requiring additional tax payments attributable to our intra-group pricing arrangements;
Our intra-group transactions primarily consisted of (i) the purchase and sale of finished goods, and (ii) provision of technology licensing and technical support services.
Business · p. 122
Separately, we have engaged an independent transfer pricing consultant to assist us to perform transfer pricing review whether our intra-group arrangements during the Track Record Period were conducted on an arm’s length basis pursuant to the transfer pricing guidelines of the OECD.
Business · p. 122
We concluded that the intra-group transfer pricing arrangements of the Group during the Track Record Period are in all material respects consistent with the arm’s length principle as set out in the OECD Transfer Pricing Guidelines.
During the Track Record Period, our Company and Zentel Japan had been engaged in certain material intra-group transactions (the "Relevant Transactions") involving the buy-sell transactions of DRAM chips.
Business · p. 192
Therefore, no significant transfer pricing risk was identified in the Relevant Transactions for the years ended December 31, 2023, 2024 and 2025.
Business · p. 193
Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, we were not aware of any enquiries, audit, investigation or challenge by any tax authorities in the PRC and other relevant tax jurisdictions in relation to our intra-group transactions and transfer pricing arrangements.
Such transactions were conducted in accordance with our Group’s transfer pricing policy, which is based on the arm’s length principle, and were entered into on normal commercial terms.
Business · p. 143
our Directors are of the view that our transfer pricing arrangements of our intra-group transactions were generally consistent with the arm’s length principle under both OECD Transfer Pricing Guidelines and the applicable transfer pricing laws and regulations in China, and no significant transfer pricing risk was identified in the Covered Transactions for the Track Record Period.
Business · p. 143
During the Track Record Period and up to the Latest Practicable Date, we were not aware of any inquiry, audit, investigation, or challenge by any tax authorities in the jurisdictions where we operate in relation to our intra-group transactions.
We have engaged Ernst & Young (China) Advisory Limited (the “Transfer Pricing Consultant”) to review the reasonableness of our transfer pricing arrangements for the above intra-group transactions during the Track Record Period from an arm’s length compliance perspective and to issue a transfer pricing analysis report.
Business · p. 165
The Transfer Pricing Consultant concluded that the Transactional Net Margin Method was the appropriate method.
Business · p. 165
After assessing our transfer pricing arrangements during the Track Record Period and up to the Latest Practicable Date, the Transfer Pricing Consultant is of the view that, during the Track Record Period and up to the Latest Practicable Date, our transfer pricing arrangements for the above intra-group transactions were consistent with the arm’s length principle.
In 2023, 2024 and 2025, revenue from intra-group transactions were RMB2.5 billion, RMB3.7 billion and RMB3.8 billion, respectively.
Business · p. 160
The Transactional Net Margin Method (“TNMM”) was used as the transfer pricing method to view whether the intra-group transactions were carried out in accordance with the arm’s-length principle.
Business · p. 162
As advised by the transfer pricing consultant according to the OECD Transfer Pricing Guidelines and applicable local transfer pricing regulations, we have conclusions that: (i) our intra-group transactions were in accordance with the arm’s-length principle under the OECD Transfer Pricing Guidelines and the local transfer pricing regulations; (ii) no material transfer pricing compliance issues have been identified; and (iii) the risk of a material transfer pricing adjustment and any related tax payment arising from transfer pricing risks can be considered relatively low.
During the Track Record Period, our Group’s subsidiaries in the PRC, Hong Kong, Germany and the United States have engaged in the following three types of intercompany transactions.
Business · p. 192
After conducting a financial analysis of the entities within our Group involved in the Covered Transactions, it is believed that such transfer pricing arrangements among the Group’s entities will not result in an unreasonable reduction in their taxable income, and the risk of incurring any material transfer pricing income tax adjustment is remote.
Business · p. 196
Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, our transfer pricing arrangements had not been subject to any challenge or investigation by any relevant tax authorities.
During the Track Record Period, our intra-group transactions primarily involved the purchase and sale of tangible goods and provision of services among our entities in the PRC, Hong Kong and Vietnam.
Business · p. 133
After conducting transfer pricing benchmarking analysis by screening and analyzing comparable companies, the Transfer Pricing Consultant concluded that given the profit level of the related subsidiaries and the appropriate provisions made during the Track Record Period, the related party transactions were generally consistent with the arm’s length principle and the Transfer Pricing Law and Regulation of PRC, Hong Kong and Vietnam, and there is no further material financial impact on the Group’s financial statements.
Business · p. 133
Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, we were not aware of any outstanding enquiries, audit, investigation or challenge by any tax authorities in Hong Kong, Chinese Mainland and Vietnam in relation to our intra-group transactions and transfer pricing arrangements.
During the Track Record Period, we conducted our operations primarily through our Company, our subsidiaries in the PRC and Hong Kong and established subsidiaries in Germany to cope with our operation in international markets.
Business · p. 163
Since June 2025, Zhaochuang Intelligent has procured a small amount of finished products from our Company and sold them to overseas third-party customers.
During the Track Record Period and up to the Latest Practicable Date, we conducted our operations primarily through our subsidiaries in China and established subsidiaries overseas to expand the operation in the international markets. During the same period, our intra-group transactions primarily included sales of goods.
Business · p. 167
We have engaged Shenzhen RSM Tax Ltd. (the "Transfer Pricing Consultant") to conduct a transfer pricing review on our intra-group transactions during the Track Record Period and up to the Latest Practicable Date to assess whether our transfer pricing arrangements are compliant with the arm's length principle in accordance with the OECD Transfer Pricing Guidelines.
Business · p. 168
Based on its analysis, the Transfer Pricing Consultant concluded that our Group complied with all Relevant Rules and Regulations during the Track Record Period and up to the Latest Practicable Date.
We entered into transactions with our related parties in relation to (i) the purchase and sale of phosphate rock and ammonia phosphate products and (ii) the provision of logistics services.
Business · p. 151
After assessing our transfer pricing arrangements during the Track Record Period, these transfer pricing arrangements, in all material respects, generally complied with the arm's length principle.
Business · p. 151
During the Track Record Period and up to the Latest Practicable Date, we had not been made aware of any inquiries, audits, or challenges by the relevant tax authorities in the jurisdictions in which we operate with respect to our transactions with the related parties.