Incredimail 2010 Annual Report Download - page 73

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 an Israeli resident (i) has a controlling interest of 25% or more in such
non-Israeli corporation, or (ii) is the beneficiary of or is 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.
Transfer Pricing
In accordance with Section 85A of the Israeli Tax Ordinance, if in an international transaction (whereby at least one party is a foreigner
or all or part of the income from such transaction is to be taxed abroad as well as in Israel) there is a special relationship between the parties
(including but not limited to family relationship or a relationships of control between companies), and due to this relationship the price set for an
asset, right, service or credit was determined or other conditions for the transaction were set such that a smaller profit was realized than what
would have been expected to be realized from a transaction of this nature, then such transaction shall be reported in accordance with customary
market conditions and tax shall be charged accordingly. This section shall apply solely to transactions that transpire after November 29, 2006, at
which time regulations with respect to this section were legislated. The assessment of whether a transaction falls under the aforementioned
definition shall be implemented in accordance with one of the procedures mentioned in the regulations and is based, among others, on
comparisons of characteristics which portray similar transactions in ordinary market conditions, such as profit, the area of activity, nature of the
asset, the contractual conditions of the transaction and according to additional terms and conditions specified in the regulations.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a description of the material U.S. federal income tax considerations applicable to an investment in the
ordinary shares by U.S. Holders who acquire our ordinary shares and hold them as capital assets for U.S. federal income tax purposes. As used in
this section, the term "U.S. Holder" means a beneficial owner of an ordinary share who is:
The term "Non-U.S. Holder" means a beneficial owner of an ordinary share who is not a U.S. Holder. The tax consequences to a Non-
U.S. Holder may differ substantially from the tax consequences to a U.S. Holder. Certain aspects of U.S. federal income tax relevant to a Non-
U.S. Holder also are discussed below.
This description is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, referred to in this discussion as the
Code, existing and proposed U.S. Treasury regulations and administrative and judicial interpretations, each as available and in effect as of the
date of this annual report. These sources may change, possibly with retroactive effect, and are open to differing interpretations. This description
does not discuss all aspects of U.S. federal income taxation that may be applicable to investors in light of their particular circumstances or to
investors who are subject to special treatment under U.S. federal income tax law, including:
•
an individual citizen or resident of the United States;
•
a corporation created or organized in or under the laws of the United States or of 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 the trust has elected validly to be treated as a United States person for U.S. federal income tax purposes or if a U.S. court is
able to exercise primary supervision over the trust’
s administration and one or more United States persons have the authority to
control all of the trust
’
s substantial decisions.
•
insurance companies;
• dealers in stocks, securities or currencies;
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