Incredimail 2011 Annual Report Download - page 75

Taxation of our Shareholders
The Tax Burden Law also increased the tax rate on dividend and capital gains by 5%. As such, starting in 2012, dividends paid to an Israeli resident and to
Israeli individuals, will be subject to 25%/30% withholding tax depending on ownership percentage, unless reduced by an applicable tax treaty. Capital gains derived
by Israeli residents and Israeli individuals, on most instruments will be subject to tax at a 25%/30% rate unless an exemption is available under domestic law or an
applicable tax treaty.
An individual is subject to a 25% tax rate on real capital gains derived from the sale of shares, as long as the individual is not a "substantial
shareholder" (generally a shareholder with 10% or more of the right to profits, right to nominate a director and voting rights) in the company issuing the shares.
A substantial shareholder will be subject to tax at a rate of 30% in respect of real capital gains derived from the sale of shares issued by a company in which
he or she is a substantial shareholder. The determination of whether the individual is a substantial shareholder will be made on the date on which the securities are
sold. In addition, the individual will be deemed to be a substantial shareholder if at any time during the 12 months preceding the date of sale, he or she was a
substantial shareholder.
However, according to the Tax Burden Law, capital gains derived from selling shares which were purchased before 2012 will be linearly split and the portion
of the gains attributed to the period the shares were held prior to 2012 will be taxed for an individual at the older rate of 20% (and 25% for a substantial shareholder).
Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-
residents of Israel are generally subject to Israeli income tax on the receipt of dividends
paid on our ordinary shares at the rate of 25%, which tax will be withheld at source, unless a different rate is provided in a treaty between Israel and the shareholder’
s
country of residence. With respect to a substantial shareholder (which is someone who alone, or together with another person, holds, directly or indirectly, at least 10%
in one or all of any of the means of control in the corporation at the time of distribution or at any time during the preceding 12 months period), the applicable tax rate
to the shareholders will be 30%. Under the U.S.-
Israel Tax Treaty, the maximum rate of tax withheld in Israel on dividends paid to a holder of our ordinary shares who
is a U.S. resident (for purposes of the U.S.-
Israel Tax Treaty) is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by our
Approved Enterprise, that are paid to a U.S. corporation holding 10% or more of our outstanding voting capital throughout the tax year in which the dividend is
distributed as well as the previous tax year, is 12.5%. Furthermore, dividends paid from income derived from our Preferred Enterprise are subject, under certain
conditions, to withholding at the rate of 15%. We cannot assure you that we will designate the profits that are being distributed in a way that will reduce shareholders’
tax liability. A non-
resident of Israel who receives dividends from which tax was withheld is generally exempt from the duty to file returns in Israel in respect of such
income, provided such income was not derived from a business conducted in Israel by the taxpayer, and the taxpayer has no other taxable sources of income in Israel.
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.
Capital Gains Taxes Applicable to an Israeli Resident Shareholders
The tax rate generally applicable to Israeli individuals on capital gains from by the sale
of shares, whether listed on a stock market or not, is 25%, or 30% if the individual is considered a "substantial shareholder" in the company issuing the shares. Israeli
corporations are generally subject to corporate tax rate (25%) on capital gains derived from the sale of listed shares.
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