Incredimail 2013 Annual Report Download - page 79

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.
Transfer Pricing
In accordance with Section 85A of the Israeli Tax Ordinance, if in an international transaction (where at least one party is a non-
Israeli
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. 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 .
Taxation of our Shareholders
Starting in 2012, dividends paid to Israeli individuals, are subject to 25% or 30% withholding tax depending on ownership percentage,
unless reduced by an applicable tax treaty. Capital gains derived by Israeli resident individuals, on sale of our shares are subject to tax at a 25%
or 30% rate unless an exemption is available under domestic law or an applicable tax treaty.
Capital Gains Taxes Applicable to 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% in 2013, and 26.5 % in 2014) on capital gains derived from the
sale of shares.
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 Israeli residents (i) have a controlling interest of more than 25% in such
non-Israeli corporation, or (ii) are the beneficiaries of or are 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.
• 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.
70