Incredimail 2009 Annual Report Download - page 100

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INCREDIMAIL LTD .
AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company rents its facilities under an operating lease agreement with an initial term expiring in 2011, with an option for
additional two years.
Future minimum lease commitments under non-cancelable operating leases are $515,000 for each of the years ending December
31, 2010 and 2011.
Total rent expenses for the years ended December 31, 2007, 2008 and 2009 amounted to $337,000, $678,000 and $448,000,
respectively.
The Company leases its motor vehicles under cancelable operating lease agreements. The minimum payment under these
operating leases, upon cancellation of these lease agreements amounted to $105,000 as of December 31, 2009. Total lease
expenses for the years ended December 31, 2007, 2008 and 2009 amounted to, $373,000, $556,000 and $382,000 respectively.
Two programs of the Company have been granted "Approved Enterprise" status under the Law. For these programs,
the Company has elected alternative benefits, waiving grants in return for tax exemptions. These benefits include a
tax-exemption for a period of two years and taxation at the reduced corporate tax rate of 25% for an additional period
of five to eight years thereafter. The benefit period commenced in 2003 and in 2005 for the first and second programs,
respectively.
The period of tax benefits detailed above is subject to limits of the earlier of 12 years from the commencement of
production or 14 years from receiving the approval. The entitlement to the above benefits is subject to fulfilling the
conditions stipulated by the Law, regulations published thereunder and letters of approval for the specific investments
in the "Approved Enterprises". In the event of failure to comply with these conditions, the benefits may be canceled
and the Company may be required to refund the amount of the benefits, in whole or in part, including interest. As of
December 31, 2009, management believes that the Company meets all conditions of the approvals.
On April 1, 2005, an amendment to the Law came into effect ("the Amendment") and has significantly changed the
provisions of 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 "Beneficiary Enterprise" (rather than the previous
terminology of Approved Enterprise), such as a provision requiring that at least 25% of the "Beneficiary Enterprise's"
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 "Beneficiary 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 "Beneficiary Enterprise" plan. The period of benefits under the Beneficiary Enterprise
program has commenced in 2008.
NOTE 8:
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COMMITMENTS AND CONTINGENT LIABILITIES
NOTE 9:
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INCOME TAXES
a.
Tax benefits under the Israel Law for the Encouragement of Capital Investments, 1959 (the "Law"):
F
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19