Incredimail 2012 Annual Report Download - page 84

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 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 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.
Legislation Regarding Medicare Tax
For taxable years beginning after December 31, 2012, a U.S. Holder that is an individual, estate or a trust that does not fall into a special
class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. Holder’s “net investment income”
for the
relevant taxable year and (2) the excess of the U.S. Holder’
s modified adjusted gross income for the taxable year over a certain threshold (which,
in the case of individuals, will be between $125 thousand and $250 thousand depending on the individual’s circumstances). A U.S. Holder’
s
“net investment income”
may generally include its dividend income and its net gains from the disposition of shares, unless such dividends or net
gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or
trading activities). If you are a U.S. Holder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the
applicability of the Medicare tax to your income and gains in respect of your investment in the shares.
Information Reporting and Back-up Withholding
In general, U.S. Holders may be subject to certain information reporting requirements under the Code relating to their purchase and/or
ownership of stock of a foreign corporation such as us. Failure to comply with these information reporting requirements may result in
substantial penalties.
For example, certain legislation generally requires certain individuals who are U.S. Holders to file Form 8938 (Statement of Specified
Foreign Assets) to report the ownership of specified foreign financial assets for tax years beginning after March 18, 2010 if the total value of
those assets exceeds an applicable threshold amount (subject to certain exceptions). For these purposes, a specified foreign financial asset
includes not only a financial account (as defined by the Code and applicable Treasury Regulations ) maintained by a foreign financial institution,
but also any stock or security issued by a non-
U.S. person, any financial instrument or contract held for investment that has an issuer or
counterparty other than a U.S. person and any interest in a foreign entity, provided that the asset is not held in an account maintained by a U.S.
financial institution. The minimum applicable threshold amount is generally $50 thousand in the aggregate, but this threshold amount varies
depending on whether the individual lives in the U.S., is married, files a joint income tax return with his or her spouse, etc. Certain domestic
entities that are U.S. Holders may also be required to file Form 8938 in the near future. U.S. Holders are urged to consult with their tax advisors
regarding their reporting obligations, including the requirement to file IRS Form 8938.
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