Incredimail 2010 Annual Report Download - page 74

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
In 2009 and 2010 we instituted a policy for distributing dividends equal to at least 50% of our net income, (which policy was changed
with respect to profits of 2011 and onwards, see “Item 8. Financial Information A. Consolidated Statements and Other Financial Information -
Policy on Dividend Distribution” for more information about the Company’
s dividend policy). 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.
• financial institutions and financial services entities;
•
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.
65