Incredimail 2012 Annual Report Download - page 78

Law for the Encouragement of Industry (Taxes), 1969
We believe that we currently qualify as an "Industrial Company" within the meaning of the Law for the Encouragement of Industry
(Taxes), 1969, or the Industry Encouragement Law. The Industry Encouragement Law defines "Industrial Company" as a company resident in
Israel, of which 90% or more of its income in any tax year, other than of income from defense loans, capital gains, interest and dividends, is
derived from an "Industrial Enterprise" owned by it. An "Industrial Enterprise" is defined as an enterprise whose major activity in a given tax
year is industrial production.
The following corporate tax benefits, among others, are available to Industrial Companies:
Eligibility for the benefits under the Industry Encouragement Law is not subject to receipt of prior approval from any governmental
authority. We cannot assure that we qualify or will continue to qualify as an "Industrial Company" or that the benefits described above will be
available in the future.
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, are 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 are subject to tax at a 25%/30% rate
unless an exemption is available under domestic law or an applicable tax treaty.
Capital Gains Taxes Applicable to an Israeli Resident Shareholders
. 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.
As of January 1, 2013, shareholders that are individuals who have taxable income that exceeds NIS 800,000 in a tax year (linked to the
CPI each year), will be subject to an additional tax, referred to as High Income Tax, at the rate of 2% on their taxable income for such tax year
which is in excess of NIS 800,000. For this purpose taxable income will include taxable capital gains from the sale of our shares and taxable
income from dividend distributions.
Israeli corporations are generally subject to the corporate tax rate (25%) on capital gains derived from the sale of shares.
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 will be 30%.
• amortization of the cost of purchased know-
how and patents, which are used for the development or advancement of the company,
over an eight
-
year period;
• accelerated depreciation rates on equipment and buildings;
•
under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies; and
•
expenses related to a public offering are deductible in equal amounts over three years.
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