Incredimail 2009 Annual Report Download - page 72

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This discussion also does not consider the tax treatment of persons or partnerships that hold ordinary shares through a partnership or
other pass-through entity or the possible application of United States federal gift or estate tax or alternative minimum tax.
We urge you to consult with your own tax advisor regarding the tax consequences of investing in the ordinary shares, including the
effects of federal, state, local, foreign and other tax laws.
Distributions Paid on the Ordinary Shares
Since 2009 we have instituted a policy for distributing dividends equal to at least 50% of our net income. Therefore, subject to the
discussion below under “Passive Foreign Investment Company Considerations,”
a U.S. Holder generally will be required to include in gross
income as ordinary dividend income the amount of any distributions paid on the ordinary shares, including the amount of any Israeli taxes
withheld, to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal
income tax purposes. Subject to the discussion below under “Passive Foreign Investment Company Considerations,”
distributions in excess of
our earnings and profits will be applied against and will reduce the U.S. Holder’
s tax basis in its ordinary shares and, to the extent they exceed
that tax basis, will be treated as gain from a sale or exchange of those ordinary shares. Our dividends will not qualify for the dividends-
received
deduction applicable in some cases to U.S. corporations. Dividends paid in NIS, including the amount of any Israeli taxes withheld, will be
includible in the income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date they are
included in income by the U.S. Holder, regardless of whether the payment in fact is converted into U.S. dollars. Any gain or loss resulting from
currency exchange fluctuations during the period from the date the dividend is includible in the income of the U.S. Holder to the date that
payment is converted into U.S. dollars generally will be treated as ordinary income or loss.
A non-corporate U.S. holder’s “qualified dividend income”
currently is subject to tax at reduced rates not exceeding 15%. For this
purpose, “qualified dividend income” generally includes dividends paid by a foreign corporation if either:
In addition, under current law a U.S. Holder must generally hold his ordinary shares for more than 60 days during the 121 day period
beginning 60 days prior to the ex-dividend date, and meet other holding period requirements for qualified dividend income.
Dividends paid by a foreign corporation will not qualify for the reduced rates, if the dividend is paid in a tax year of the recipient
beginning after December 31, 2002, unless such corporation is treated, for the tax year in which the dividend is paid or the preceding tax year, as
a “passive foreign investment company” for U.S. federal income tax purposes. We do not believe that we will be classified as a “
passive foreign
investment company” for U.S. federal income tax purposes for our current taxable year. However, see the discussion under “
Passive Foreign
Investment Company Considerations” below.
●
real estate investment trusts;
●
regulated investment companies;
●
persons that receive ordinary shares as compensation for the performance of services;
●
tax
-
exempt organizations;
●
persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument;
●
individual retirement and other tax
-
deferred accounts;
●
expatriates of the United States;
●
persons (other than Non
-
U.S. Holders) having a functional currency other than the U.S. dollar; and
●
direct, indirect or constructive owners of 10% or more, by voting power or value, of us.
(a)
the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in
the U.S., or
(b)
that corporation is eligible for benefits of a comprehensive income tax treaty with the U.S. which includes an information exchange
program and is determined to be satisfactory by the U.S. Secretary of the Treasury. The Internal Revenue Service has determined
that the U.S.
-
Israel Tax Treaty is satisfactory for this purpose.
66