During the Track Record Period and up to the Latest Practicable Date, our Company, our controlled affiliates and subsidiaries had been engaged in certain material intra-company transactions involving the buy-sell transactions of tangible goods, provision of services and leasing arrangements.
Business · p. 297
We have appointed Ernst & Young (China) Advisory Limited, an international professional accounting firm as our transfer pricing consultant (the “Transfer Pricing Consultant”) to review our transfer pricing arrangements.
Business · p. 298
The Transfer Pricing Consultant is of the view that the risk of potential transfer pricing adjustment is remote.
We follow the guidelines set forth by the Organization for Economic Co-operation and Development (“OECD”) Transfer Pricing Guidelines (“OECD Transfer Pricing Guidelines”), which are generally consistent with the tax laws of jurisdictions involved in our intra-group transactions, including mainland China, Hong Kong, Taiwan, the United States and Europe.
Business · p. 242
We have engaged an independent Transfer Pricing Consultant, Grant Thornton, to conduct benchmarking studies (the “Benchmarking Study”) on the Covered Transactions, in accordance with the OECD Transfer Pricing Guidelines.
Business · p. 242
During the Track Record Period and up to the Latest Practicable Date, to the knowledge of our Directors, we were not aware of any inquiries, audit, investigation or challenge by any relevant tax authorities in mainland China, Hong Kong, Taiwan, the United States and Europe in relation to the Covered Transactions.
During the same period, our international intra-group transactions primarily included (i) exporting products from AUX Import & Export to affiliated overseas companies in selected overseas jurisdictions for sales to our overseas distributors and customers; (ii) exporting semi-finished products from AUX Import & Export to the production base in Thailand and manufacturing into finished products for subsequent sales; and
Business · p. 196
(iii) receiving R&D services from the R&D center in Japan (together, the “Covered Transactions”).
Business · p. 196
The Transfer Pricing Advisor conducted an independent analysis and considers the transfer pricing arrangements of the Covered Transactions to be compliant with the arm’s length principle in accordance with the OECD Transfer Pricing Guidelines during the Track Record Period.
During the Track Record Period, our Group’s intra-group transactions, which involved subsidiaries in Hong Kong, the PRC and the U.S., primarily included tangible goods buy-sell, with total revenue amount of RMB1,089.7 million, RMB1,251.8 million, and RMB1,583.9 million in FY2022, FY2023 and FY2024, respectively (collectively, the “Covered Transactions”).
Business · p. 258
Based on the Benchmark Study prepared based on representations made by and information provided by the Company, our Transfer Pricing Consultant is of the view, and theランプ Sponsor concurs, that our intra-group transactions in the PRC, Hong Kong and the United States during the Track Record Period align with the arm’s length principles that no transfer pricing adjustment that trigger additional tax was identified from applicable transfer pricing laws and regulations perspective; and our Group as a whole is not exposed to the risk of underpayment of corporate income tax in the PRC, Hong Kong and the United States where the Relevant Subsidiaries are located during the Track Record Period.
During the Track Record Period, some of our sales were made through GAI, and our Group's major intra-group transaction was GAI's purchase of alumina (including aluminium hydroxide) from BAI ("Covered Transaction").
Business · p. 237
The transfer pricing adviser has compared the OMs of GAI (i.e., tested party) during the Track Record Period with the three-year (for the period 2020 to 2022) weighted average inter-quartile range of OMs for independent comparable companies and discovered that GAI's OM from its distribution activities for the Track Record Period lies below the inter-quartile range of OM achieved by the set of independent comparable companies.
Business · p. 239
On the basis of the above, it was concluded by the benchmarking study performed that the Covered Transaction during the Track Record Period is in accordance with the arm's length principle from a Singapore transfer pricing perspective and has complied with the Singapore TP Guidelines with respect to requiring the related party transaction to be carried out on an arm's length basis.
These transactions are regarded as transfer pricing arrangements.
Business · p. 396
GSWL received a tax demand notice of US$7,082,002.81 in May 2024 and GSWL has charged the whole amount to income statement and increased tax provision at the same time.
Business · p. 396
Based on the transfer pricing reviews mentioned above, our transfer pricing arrangements in 2021, 2022 and 2023 were generally within the profit range that was considered an appropriate range for arm’s length transactions in 2021, 2022 and 2023.
During the Track Record Period, our Group’s subsidiaries in the PRC, Hong Kong, Singapore, Portugal and Norway have engaged in the following five types of intercompany transactions, namely (i) product buy-sell transactions, (ii) technical services, (iii) sales support services, (iv) R&D support services and (v) administrative service.
Business · p. 220
Our Directors, together with the Transfer Pricing Tax Consultant, are of the view that the abovementioned Covered Transactions were largely consistent and in compliance with the relevant transfer pricing regulations and OECD TPG during the Track Record Period in material aspects.
As Numans Sales did not have office and employees during the Track Record Period, the PRC Subsidiaries provided sales support and administrative services to Numans Sales and charged Numans Sales service fees.
Business · p. 248
Our Tax Adviser advised that the Service Fee complied with the arm’s length principle and as such the transfer pricing arrangement complied with the relevant PRC tax laws.
During the Track Record Period, our Group’s intra-group transactions, which involved subsidiaries in Hong Kong, the PRC, Japan, the United States, Indonesia, India, Philippines, Singapore, and Malaysia, included tangible goods buy-sell and operational support service transactions, with total values of RMB61.1 million, RMB163.9 million, RMB697.0 million, and RMB182.3 million in 2021, 2022, 2023 and the three months ended March 31, 2024, respectively (collectively, the “Covered Transactions”).
Business · p. 279
We have engaged an independent transfer pricing advisor, Acclime Tax Advisory (Hong Kong) 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. 282
Our Transfer Pricing Advisor is of the opinion that after the Transfer Pricing Adjustments, the profit levels of the relevant subsidiaries are reasonable and commensurate with their respective functions and risks, and our transfer pricing arrangement aligns with the arm’s length principle according to the OECD Transfer Pricing Guidelines.
To assess the intra-group transactions between Metasurface Technologies and SGP Malaysia, the Transfer Pricing Consultant conducted benchmarking analysis to search for comparable companies performing similar manufacturing functions and producing similar products as SGP Malaysia.
Business · p. 210
A total of 36 companies are identified as performing similar functions and producing similar products as SGP Malaysia and a five-year weighted average FCMU interquartile range of 3.36% to 7.61%, with a median of 5.16% were recorded.
Business · p. 210
For the years ended 31 December 2022 and 2023, SGP Malaysia achieved a FCMU of 7.51% and 9.87%, respectively.
For finished goods being sold to UBoT Inc. (HK), they will be further sold to independent customers around the world.
Business · p. 240
According to the data selection procedures and analysis performed under the Transfer Pricing Analysis, the berry ratios of UBoT Inc. (SG) calculated for FY2021 (1.02), FY2022 (1.15) and FY2023 (0.95) fell below the inter-quartile range of the average berry ratios for the comparable companies from 2019 to 2021 (i.e. between 1.12 and 1.84, with a median of 1.49) and that from 2020 to 2022 (i.e. between 1.29 and 1.96, with a median of 1.70) respectively^(Note)^.
Business · p. 244
In this regard, since the amounts of the overall tax liability adjustments are minimal, our Tax Consultant does not foresee any material income tax provision required even under the transfer pricing adjustment scenarios.
During the Track Record Period, Guangdong Migao held KCL automatic import licences. It purchased and imported KCL from overseas suppliers directly for our Group and sold the KCL to our other PRC subsidiaries for further granulating, manufacturing or selling purposes.
Business · p. 265
Singapore Migao purchased finished products, mainly SOP, from Guangdong Migao and Changchun Migao for ongoing sales to overseas customers during the Track Record Period.
Business · p. 266
The Transfer Pricing Consultant considered the reasons provided by our management are legitimate business reasons.
All the fabricated structural steel products processed by Wing Kei Dongguan are then transferred to Wing Kei Hong Kong on a cost plus basis, for onward use in our Group’s structural steel projects in Hong Kong.
Business · p. 196
Wing Kei Dongguan recorded net loss in FY2020 and FY2022 and such net loss position in FY2020 and FY2022 were mainly due to the impact of COVID-19 pandemic.
Business · p. 196
Our executive Directors, after considering the analysis result and reviewing the transfer pricing study prepared by our independent tax adviser, are of the view that the Transfer Pricing Arrangements were carried out on an arm’s length basis in a material respect and does not result in material reduction to Wing Kei Dongguan’s taxable income in the PRC for the three years ended 31 December 2022.
During the Track Record Period, almost all of our Group’s intercompany buy-sell transactions were conducted within Mainland China, while only a small amount of cross-border intercompany buy-sell transactions (i.e. around 8.45% of the total intercompany buy-sell transactions during the Track Record Period) were conducted between our Group’s Chinese and overseas entities.
Business · p. 280
Our Group has engaged an independent transfer pricing tax consultant, namely Shenzhen Qianhai PricewaterhouseCoopers Business Consulting Services Co., Limited ("Transfer Pricing Consultant"), to conduct a transfer pricing review, including benchmarking studies, to evaluate the transfer pricing arrangement in relation to the above-mentioned intra-group transactions.
Business · p. 282
Our Directors, together with the Transfer Pricing Consultant, are of the view that the abovementioned intercompany transactions of our Group were in line with the arm’s length principle and our Group has been in compliance with the relevant transfer pricing laws and regulations during the Track Record Period and up to the Latest Practicable Date.
For individuals and businesses in the PRC requesting cross-border e-commerce logistics services from the PRC to Hong Kong, or from the PRC to overseas countries passing through Hong Kong, Shenzhen Global Link was principally the engagement party for such services, and responsible for the liaison with the customers in the PRC, including the confirmation of orders from customers via our order system, collecting the parcels from the customers and arranging the delivery of parcels from the PRC to Hong Kong.
Business · p. 286
Thereafter, Global Link was engaged by Shenzhen Global Link for further arrangement of the delivery of parcels in Hong Kong, or delivery of parcels to overseas countries by other logistics service providers engaged by Global Link.
Our Company, our controlled affiliated entities and our subsidiaries conduct intra-group provisions of services and other related party transactions in accordance with our transfer pricing policy.
Business · p. 255
Based on the transfer pricing review, it is indicated that the license fee rate and the profit level indicators of the licensees are generally within the profit range that was considered an appropriate range for the arm’s length transactions during the Track Record Period and up to the Latest Practicable Date.
Business · p. 256
Based on the above, and as advised by our tax advisers, our Directors are of the view that the above-mentioned inter-company transactions are in line with the arm’s length principle and we are in compliance with the relevant transfer pricing laws and regulations during the Track Record Period and up to the Latest Practicable Date.
In this regard, we have engaged an independent transfer pricing consultant, Ernst & Young (China) Advisory Limited, (the "Transfer Pricing Consultant"), an international professional accounting firm in the PRC, to review our transfer pricing arrangements from an arm's length compliance perspective.
Business · p. 274
Based on the Transfer Pricing Consultant's review, Transfer Pricing Consultant is of the view that the weighted average price and profit level of the Covered Transactions fell within their respective profit range of arm's length transactions during the Track Record Period and, as a result, our pricing arrangements were in accordance with the OECD Transfer Pricing Guidelines.
Business · p. 274
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 and the PRC in relation to our intra-group transactions and transfer pricing arrangements.
During the Track Record Period, certain of our PRC subsidiaries provided intragroup research and development services and commercial support services to Powerwin Media, one of our Hong Kong subsidiaries.
Financial Information · p. 296
The evaluation of uncertain tax positions associated with such type of transactions involves significant judgment as to the ultimate outcome, the interpretation and application of the relevant tax laws and the determination of the appropriate transfer pricing that reflects the location of value creation.
During the Track Record Period, Seacon Enterprise was engaged by Seacon Shipping and the MSI-AIS ANCs for the provision of ship operation services, pursuant to which Seacon Enterprise is responsible for (a) searching and negotiating for and executing the chartering of vessels and/or transport of cargo; (b) conducting assessment and settlement of voyages, calculating charter hire, freight, demurrage, despatch and other charges, and collecting income and fees from third parties; (c) issuing voyage instructions; and (d) other matters relating to the operation of vessels controlled by Seacon Shipping and the MSI-AIS ANCs.
Business · p. 337
The Tax Adviser noted that the full cost mark-up (''FCMU'') ratios achieved by Seacon Ships Qingdao in the Subcontracting Arrangement ranged from 16% to 20% during the years ended December 31, 2019, 2020 and 2021 as follows:
Business · p. 338
Given the aforementioned FCMU ratios are on the high side based on the Tax Adviser's experience in other benchmarking studies for ship management companies whose functional profiles are comparable to Seacon Ships Qingdao in the Subcontracting Arrangement, the Tax Adviser is of the view that the risk of Seacon Qingdao being challenged by the relevant PRC tax authorities on its transfer pricing arrangement in the Subcontracting Arrangement during the Track Record Period is remote.