Incredimail 2009 Annual Report Download - page 67

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Our OEM Agreement with Commtouch Ltd., effective December 7, 2004 and most recently renewed effective July 15, 2008, is
described under “Item 4.B Business Overview — Intellectual Property”
and a copy of this agreement has been filed as Exhibit 10.3 to our
registration statement on Form F-1 (File No. 333-129246.The employment agreements with our principal officers are described under “
Item 6.C
Board Practices — Employment Agreements”.
D. EXCHANGE CONTROLS
Non-
residents of Israel who hold our ordinary shares are able to receive any dividends, and any amounts payable upon the dissolution,
liquidation and winding up of our affairs, freely repatriable in non-
Israeli currency at the rate of exchange prevailing at the time of conversion.
However, Israeli income tax is required to have been paid or withheld on these amounts. In addition, the statutory framework for the potential
imposition of exchange controls has not been eliminated, and may be restored at any time by administrative action.
E. TAXATION
The following is a general summary only and should not be considered as income tax advice or relied upon for tax planning purposes.
ISRAELI TAXATION
THE FOLLOWING DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX
CONSEQUENCES RELATING TO THE OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES. YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF YOUR PARTICULAR SITUATION, AS WELL AS ANY
TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING
JURISDICTION.
The following is a summary of the material Israeli tax laws applicable to us, and some Israeli Government programs benefiting us. This
section also contains a discussion of some Israeli tax consequences to persons acquiring our ordinary shares. This summary does not discuss all
the acts of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of
investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or traders in securities who
are subject to special tax regimes not covered in this discussion. Since some parts of this discussion are based on new tax legislation that has not
yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the
views expressed in this discussion.
The discussion below should not be construed as legal or professional tax advice and does not cover all possible tax considerations.
Potential investors are urged to consult their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and
disposition of our ordinary shares, including, in particular, the effect of any foreign, state or local taxes.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax at the rate of 26% in 2009. The rate was 27% for 2008, 25% in 2010 and
thereafter is scheduled to decline to 18% by 2016. However, the effective tax rate payable by a company that derives income from an
approved enterprise (as discussed below) may be considerably less. In March 2006, a new program was approved, to begin in 2008.
Special Provisions Relating to Taxation under Inflationary Conditions
The Income Tax Law (Inflationary Adjustments), 1985, or the Inflationary Adjustments Law, represents an attempt to overcome the
problems presented to a traditional tax system by an economy undergoing rapid inflation. The Inflationary Adjustments Law is highly complex.
Until December 31, 2005 we measured our Israeli taxable income in accordance with this law, but from January 1, 2006 we have elected to
measure our Israeli taxable income in U.S. dollars, rather than the Israeli inflation index. We were permitted to make such a change pursuant to
regulations published by the Israeli Minister of Finance, which provide the conditions for so doing. We believe that we meet the necessary
conditions and as such, continue to measure our results for tax purposes based on the U.S. dollar.
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