Incredimail 2014 Annual Report Download - page 26

Subject to specified time limitations and legal procedures, under the rules of private international law currently prevailing in Israel,
Israeli courts may enforce a U.S. judgment in a civil matter, including a judgment based upon the civil liability provisions of the U.S. securities
laws, as well as a monetary or compensatory judgment in a non-civil matter, provided that the following key conditions are met:
The tax benefits available to us require us to meet several conditions and may be terminated or reduced in the future, which would
increase our costs and taxes.
We have benefited and currently benefit from a variety of government programs and tax benefits that generally carry conditions that we
must meet in order to be eligible to obtain any benefit. Our tax expenses and the resulting effective tax rate reflected in our financial statements
may increase over time as a result of changes in corporate income tax rates, other changes in the tax laws of the countries in which we operate,
non-deductible expenses, loss and timing differences, or changes in the mix of countries, where we generate profit.
If we fail to meet the conditions upon which certain favorable tax treatment is based, we would not be able to claim future tax benefits
and could be required to refund tax benefits already received. Any of the following could have a material effect on our overall effective tax rate:
Additional details are provided in "Item 5 –
Operating and Financial Review and Products" under the caption "Taxes on income," in
"Item 10 –
Additional Information" under the caption "Israeli taxation, foreign exchange regulation and investment programs" and in note 10 to
our Financial Statements.
If we are characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences.
Non-
U.S. corporations generally may be characterized as a passive foreign investment company ("PFIC") for any taxable year, if, after
applying certain look through rules, either (1) 75% or more of such company’
s gross income is passive income, or (2) at least 50% of the average
value of all such company’s assets (determined on an average quarterly basis) are held for the production of, or produce, passive income.
If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the
sale of our ordinary shares taxed at ordinary income rates, rather than capital gain rates. Similar rules apply to distributions that are "excess
distributions." In addition, both gains upon disposition and amounts received as excess distributions could be subject to an additional interest
charge. A determination that we are a PFIC could also have an adverse effect on the price and marketability of our ordinary shares.
We believe that in 2014 we were not a PFIC. Whether we are a PFIC is based upon certain factual matters such as the valuation of our
assets. In calculating the value of our assets, we value our total assets, in part, based on our total market capitalization. We believe this valuation
approach is reasonable. There is no assurance whether the IRS will challenge our valuations. If the IRS were to successfully challenge such
valuations, we may potentially be classified as a PFIC for the 2014 taxable year or prior taxable years. Furthermore, there can be no assurance
that we will not become a PFIC in the future. See a discussion of our PFIC status in Item 10.E under "U.S. Federal Income Tax Considerations
–
Passive Foreign Investment Company Considerations."
• subject to limited exceptions, the judgment is final and non-appealable;
• the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in such state;
•
the judgment was rendered by a court competent under the rules of private international law applicable in Israel;
•
the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts;
•
adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and
evidence;
• the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel;
•
the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same
parties; and
•
an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted in
the U.S. court.
• we may be unable to meet the requirements for continuing to qualify for some programs;
•
these programs and tax benefits may be unavailable at their current levels; or
•
we may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.
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