Incredimail 2008 Annual Report Download - page 89

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F - 22
the Law. The Amendment limits the scope of enterprises which may be approved by the Investment Center by setting criteria for
the approval of a facility as a “Privileged Enterprise” (rather than the previous terminology of Approved Enterprise), such as a
provision requiring that at least 25% of the “Privileged Enterprise” income will be derived from export. Additionally, the
Amendment enacted major changes in the manner in which tax benefits are awarded under the Law so that companies are no longer
required for Investment Center approval in order to qualify for tax benefits. The period of tax benefits for a new “Privileged
Enterprise”commences in the “Year of Commencement”. This year is the later of: (1) the year in which taxable income is first
generated by the Company, or (2) a year selected by the Company for commencement, on the condition that the Company meets
certain provisions provided by the Law (
“
Year of Election
”
).
In addition, the Law provides that terms and benefits included in any letter of approval already granted will remain subject to the
provisions of the law as they were on the date of such approval. Therefore, the two existing Approved Enterprises will not be
subject to the provisions of the Amendment.
The Company has one “Privileged Enterprise” plan. The period of benefits under the Privileged Enterprise first program has
commenced in 2008.
As a result of the amendment, tax-exempt income generated under the provisions of the amended law, will subject the Company to
taxes upon dividend distribution or complete liquidation.
As of December 31, 2008, approximately $7,954,000 is tax-exempt attributable to its various Approved Enterprise and Privileged
Enterprise programs. If such tax exempt income is distributed (other than in respect of the first two programs upon the complete
liquidation of the Company), it would be taxed at the reduced corporate tax rate applicable to such profits (currently 25%) and an
income tax liability of up to approximately $1,989,000 would be incurred as of December 31, 2008. The Company does not intend
to distribute dividend out off tax exempt income incurred up to December 31, 2008, accordingly no deferred tax liability have been
provided on income attributable to the Company’s Approved Enterprise and Privileged Enterprise programs. In March 2009, the
Company board of directors approved a cash dividend in the amount of $4.6 million (see note 14). The amount of tax exempt
income will not change as a result of this dividend, since the distribution is from sources other than tax exempt income.
INCREDIMAIL LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9:
-
INCOME TAXES (Cont.)
Income of the Company from sources other than the Approved Enterprise and Privileged Enterprise during the period of benefits is
taxable at the regular corporate tax rate.
b.
Corporate tax rates in Israel:
Taxable income of Israeli companies is subject to tax at the rate of 27% in 2008, 26% in 2009 and 25% in 2010 and thereafter.
c.
Deferred tax assets, net:
Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. Components of the Company
’
s deferred tax assets are as follows:
December 31,
2007
2008
U.S. dollars in thousands
Employee benefits
$
138
$
304
Research and development expenses
181
157
Issuance costs
123
-
Other
-
than
-
temporary impairment on marketable
securities and ARS
1,287
301
Impairment of intangible assets and goodwill
36
83
Other
-
150
Deferred tax assets, before valuation allowance
1,765
995
Valuation allowance *)
(1,287
)
(301
)