Incredimail 2013 Annual Report Download - page 81

Additionally, the tax treatment of persons who are, or hold our ordinary shares through, a partnership or other pass-
through entity is not
discussed, and such persons should consult their advisor as to their tax consequences. The possible application of the alternative minimum tax,
U.S. federal estate or gift taxes and any aspect of state, local or non-U.S. tax laws are also not considered in this discussion.
We urge you to consult with your own tax advisor regarding the tax consequences of investing in the ordinary shares, including the
effects of U.S. federal, state, local, and foreign or other tax laws.
Distributions Paid on the Ordinary Shares
Subject to the discussion below under "Passive Foreign Investment Company Considerations," a U.S. Holder generally will be required
to include in gross income as ordinary dividend income the amount of any distributions paid by us on the ordinary shares, including the amount
of any non-
U.S. income taxes withheld, to the extent that those distributions are paid out of our current or accumulated earnings and profits as
determined for U.S. federal income tax purposes. Distributions in excess of our earnings and profits will be applied against and will reduce the
U.S. Holder’
s tax basis in its ordinary shares and, to the extent they exceed that tax basis, will be treated as gain from a sale or exchange of those
ordinary shares. Our dividends generally will not qualify for the dividends-
received deduction applicable, in some cases, to U.S. corporations.
Dividends paid in NIS, including the amount of any non-
U.S. income taxes withheld, will be includible in the income of a U.S. Holder in a U.S.
dollar amount calculated by reference to the exchange rate in effect on the date they are included in income by the U.S. Holder, regardless of
whether the payment in fact is converted into U.S. dollars. A U.S. holder that receives dividends paid in NIS (or any other foreign currency) and
converts the NIS (or other foreign currency) into dollars after the date such dividends are included in income may have foreign exchange gain or
loss based on any appreciation or depreciation in the value of the NIS (or other foreign currency) against the dollar, which will generally be U.S.
source ordinary income or loss.
A non-corporate U.S. holder’
s "qualified dividend income" may be taxed at reduced rates (currently, a maximum rate of 20% applies).
For this purpose, "qualified dividend income" generally includes dividends paid by a non-U.S. corporation if either:
In addition, a U.S. Holder generally must hold its ordinary shares for less than 61 days during the 121-
day period beginning on the date
that is 60 days prior to the ex-
dividend date with respect to such dividend, excluding for this purpose, under the rules of Code section 246(c), any
period during which the U.S. Holder has an option to sell, is under a contractual obligation to sell, has made and not closed a short sale of, is the
grantor of a deep-in-the-
money or otherwise nonqualified option to buy, or has otherwise diminished its risk of loss by holding other positions
with respect to, such ordinary share (or substantially identical securities) or (2) the U.S. Holder is under an obligation (pursuant to a short sale or
otherwise) to make related payments with respect to positions in property substantially similar or related to the ordinary share with respect to
which the dividend is paid.
In addition, a non-
corporate U.S. Holder will be able to take a qualified dividend into account in determining its deductible investment
interest (which is generally limited to its net investment income) only if it elects to do so; in such case the dividend will be taxed at ordinary
income tax rates. Dividends paid by a non-
U.S. corporation will not be qualified dividend income and thus, not qualify for reduced rates, if such
corporation is, for the tax year in which the dividend is paid or the preceding tax year, a "passive foreign investment company" for U.S. federal
income tax purposes.
• persons that acquire ordinary shares upon the exercise of employee stock options or otherwise as compensation;
• 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;
• certain former citizens or long-term residents of the United States;
•
persons (other than Non-U.S. Holders) having a functional currency other than the U.S. dollar; and
•
persons that own directly, indirectly or constructively 10% or more of our voting shares.
(a)
the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market
in the United States, or
(b)
that corporation is eligible for the benefits of a comprehensive income tax treaty with the United States which includes an
information exchange program and is determined to be satisfactory by the United States Secretary of the Treasury. The Internal
Revenue Service has determined that the United States
-
Israel Tax Treaty is satisfactory for this purpose.
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