Incredimail 2011 Annual Report Download - page 116

PERION NETWORK LTD. AND ITS SUBSIDIARIES
(Formerly: Incredimail Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10:
-
INCOME TAXES (Cont.)
In November 2010 the Company's Board decided to change its dividend policy so that beginning with earnings of 2011 and beyond, the
Company does not intend to distribute any dividends to the holders of its Ordinary shares. As of December 31, 2011, tax exempt income
incurred up to December 31, 2010 that was not distributed was approximately $ 8,900. Should this amount be distributed, it would be taxed at
the reduced corporate tax rate applicable to such profits (currently 25%), and income tax liability of up to approximately $ 2,225 would be
incurred as of December 31, 2011.
The Knesset enacted a reform to the Investment Law, effective January 2011. According to the reform a flat tax rate will apply to companies
eligible for the “Preferred Enterprise”
status. In order to be eligible for Preferred Enterprise status, a company must meet minimum
requirements to establish that it contributes to the country’
s economic growth and is a competitive factor for the Gross Domestic Product (a
competitive enterprise). Israeli companies which currently benefit from an Approved or Beneficiary Enterprise status and meet the criteria for
qualification as a Preferred Enterprise can elect to apply the new Preferred Enterprise benefits by waiving their benefits under the Approved
and Beneficiary Enterprise status.
Commencing 2011, the Company elected to apply the new Preferred Enterprise benefits. Benefits granted to a Preferred Enterprise include
reduced and gradually decreasing tax rates. The tax rate is 15% in 2011 and 2012, 12.5% in 2013 and 2014 and 12% starting from 2015.
A distribution from a Preferred Enterprise out of the “Preferred Income” would be subject to 15% withholding tax for Israeli-
resident
individuals and non-Israeli residents (subject to applicable treaty rates). A distribution from a Preferred Enterprise out of the “
Preferred
Income
”
would be exempt from withholding tax for an Israeli
-
resident company.
b.
Corporate tax rates in Israel:
The regular corporate tax rate in Israel in 2009, 2010 and 2011 is 26%, 25% and 24%, respectively. In December 5, 2011 the Knesset passed a
law for
changing the tax burden, which cancels, among others, the gradual reduction in the rates of the Israeli corporate tax. In addition, the
Israeli corporate tax will be increased to 25% starting from 2012. The real capital gains tax was also increased to 25%, accordingly.
c.
Income taxes of non
-
Israeli subsidiaries:
Non
-
Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence.
F
-
29