Incredimail 2014 Annual Report Download - page 81

As of January 1, 2013, shareholders that are individuals who have taxable income that exceeds ILS 800,000 in a tax year (linked to the
CPI each year) (ILS 811,560 in 2014), will be subject to an additional tax, referred to as High Income Tax, at the rate of 2% on their taxable
income for such tax year which is in excess of ILS such threshold. For this purpose taxable income will include taxable capital gains from the
sale of our shares and taxable income from dividend distributions.
Israeli corporations are generally subject to the corporate tax rate (currently 26.5 %) on capital gains derived from the sale of shares.
Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders.
Shareholders that are not Israeli residents are generally exempt
from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our ordinary shares, provided that (1) such
shareholders did not acquire their shares prior to our initial public offering, (2) the shares are listed for trading on the Tel Aviv Stock Exchange
and/or a foreign exchange, and (3) such gains did not derive from a permanent establishment of such shareholders in Israel. However, non-
Israeli
corporations will not be entitled to the foregoing exemptions if Israeli residents (i) have a controlling interest of more than 25% in such non-
Israeli corporation, or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-
Israeli corporation,
whether directly or indirectly. In certain instances, where our shareholders may be liable to Israeli tax on the sale of their ordinary shares, the
payment of the consideration may be subject to the withholding of Israeli tax at the source.
Under the U.S.-
Israel Tax Treaty, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S. resident (for
purposes of the U.S.-
Israel Tax Treaty) holding the ordinary shares as a capital asset is exempt from Israeli capital gains tax unless either (i) the
shareholder holds, directly or indirectly, shares representing 10% or more of our voting capital during any part of the 12-
month period preceding
such sale, exchange or disposition, or (ii) the capital gains arising from such sale are attributable to a permanent establishment of the shareholder
located in Israel.
Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-
residents of Israel are generally subject to Israeli income tax on the
receipt of dividends paid on our ordinary shares at the rate of 25%, which tax will be withheld at source, unless a different rate is provided in a
treaty between Israel and the shareholder’
s country of residence. With respect to a substantial shareholder (which is someone who alone, or
together with another person, holds, directly or indirectly, at least 10% in one or all of any of the means of control in the corporation at the time
of distribution or at any time during the preceding 12 months period), the applicable tax rate will be 30%.
Under the U.S.-
Israel Tax Treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary shares who is
a U.S. resident (for purposes of the U.S.-
Israel Tax Treaty) is 25%. However, generally, the maximum rate of withholding tax on dividends, not
generated by our Approved, Beneficiary or Preferred Enterprises that are paid to a U.S. corporation holding 10% or more of our outstanding
voting capital throughout the tax year in which the dividend is distributed as well as the previous tax year, is 12.5%. The lower 12.5% rate does
not apply if the company has more than 25% of its gross income derived from certain types of passive income. Furthermore, dividends paid from
income derived from our Approved, Beneficiary or Preferred Enterprise are subject, under certain conditions, to withholding at the rate of 15%
or 20%. We cannot assure you that we will designate the profits that are being distributed in a way that will reduce shareholders’
tax liability. A
non-
resident of Israel who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect
of such income, provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other
taxable sources of income in Israel.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a description of certain U.S. federal income tax considerations applicable to an investment in our ordinary
shares by U.S. Holders (defined below) who acquire our ordinary shares and hold them as capital assets for U.S. federal income tax purposes
(generally, for investment). As used in this section, the term "U.S. Holder" means a beneficial owner of an ordinary share who is:
• an individual citizen or resident of the United States;
•
a corporation (or entity classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of
the United States, any state of the United States or the District of Columbia;
• an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
•
a trust if (i) a court within the United States is able to exercise primary supervision over its administration and one or more U.S.
persons have the authority to control all of its substantial decisions or (ii) the trust has in effect a valid election under applicable U.S.
Treasury Regulations to be treated as a U.S. person.
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