Incredimail 2011 Annual Report Download - page 76

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;
•
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;
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