Incredimail 2010 Annual Report Download - page 77

The passive foreign investment company rules described above will not apply to a U.S. Holder if the U.S. Holder makes an election to
treat us as a qualified electing fund. However, a U.S Holder may make a qualified electing fund election only if we furnish the U.S. Holder with
certain tax information. We currently do not provide this information, and we currently do not intend to take actions necessary to permit you to
make a qualified electing fund election in the event we are determined to be a passive foreign investment company. As an alternative to making
this election, a U.S. Holder of passive foreign investment company stock which is publicly-
traded may in certain circumstances avoid certain of
the tax consequences generally applicable to holders of a passive foreign investment company by electing to mark the stock to market annually
and recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair
market value of the passive foreign investment company stock and the U.S. Holder’
s adjusted tax basis in the passive foreign investment
company stock. Losses would be allowed only to the extent of net mark-to-
market gain previously included by the U.S. Holder under the
election for prior taxable years. This election is available for so long as our ordinary shares constitute "marketable stock," which includes stock
of a passive foreign investment company that is "regularly traded" on a "qualified exchange or other market." Generally, a "qualified exchange
or other market" includes a national market system established pursuant to Section 11A of the Exchange Act. A class of stock that is traded on
one or more qualified exchanges or other markets is "regularly traded" on an exchange or market for any calendar year during which that class of
stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. We believe that the Nasdaq Global Market
will constitute a qualified exchange or other market for this purpose. However, no assurances can be provided that our ordinary shares will
continue to trade on the Nasdaq Global Market or that the shares will be regularly traded for this purpose.
The rules applicable to owning shares of a passive foreign investment company are complex, and each prospective purchaser who
would be a U.S. Holder should consult with its own tax advisor regarding the consequences of investing in a passive foreign investment
company.
Information Reporting and Back-up Withholding
Holders generally will be subject to information reporting requirements with respect to dividends paid in the United States on ordinary
shares. In addition, Holders will be subject to back-
up withholding tax on dividends paid in the United States on ordinary shares unless the
holder provides an IRS certification or otherwise establishes an exemption. Holders will be subject to information reporting and back-
up
withholding tax on proceeds paid within the United States from the disposition of ordinary shares unless the holder provides an IRS certification
or otherwise establishes an exemption. Information reporting and back-
up withholding may also apply to dividends and proceeds paid outside
the United States that are paid by certain "U.S. payors" or "U.S. middlemen," as defined in the applicable Treasury regulations, including:
The back-up withholding tax rate is 28%. Back-up withholding and information reporting will not apply to payments made to Non-
U. S.
Holders if they have provided the required certification that they are not United States persons.
In the case of payments by a payor or middleman to a foreign simple trust, foreign grantor trust or foreign partnership, other than
payments to a holder that qualifies as a withholding foreign trust or a withholding foreign partnership within the meaning of the Treasury
regulations and payments that are effectively connected with the conduct of a trade or business in the United States, the beneficiaries of the
foreign simple trust, the person treated as the owner of the foreign grantor trust or the partners of the foreign partnership will be required to
provide the certification discussed above in order to establish an exemption from backup withholding tax and information reporting
requirements.
The amount of any back-up withholding may be allowed as a credit against a U.S. Holder’
s U.S. federal income tax liability and may
entitle the holder to a refund, provided that required information is furnished to the IRS.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
(1)
a U.S. person;
(2)
the government of the U.S. or the government of any state or political subdivision of any state (or any agency or instrumentality
of any of these governmental units);
(3)
a controlled foreign corporation;
(4)
a foreign partnership that is either engaged in a U.S. trade or business or whose Untied States partners in the aggregate hold more
than 50% of the income or capital interests in the partnership;
(5)
a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the
U.S.; or
(6)
a U.S. branch of a foreign bank or insurance company.
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