Vistaprint 2006 Annual Report Download - page 36

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available under the Internal Revenue Code of 1986, as amended, such shareholders would be liable to pay United States federal income tax at
the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our
common shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of our common shares.
We believe that we were not a PFIC for the tax year ended June 30, 2006 and we expect that we will not become a PFIC in the
foreseeable future. However, whether we are treated as a PFIC depends on questions of fact as to our assets and revenues that can only be
determined at the end of each tax year. Accordingly, we cannot be certain that we will not be treated as a PFIC for our current tax year or for any
subsequent year.
If a United States shareholder acquires 10% or more of our common shares, it may be subject to increased United States taxation under
the “controlled foreign corporation” rules.
Each “10% U.S. Shareholder” of a foreign corporation that is a “controlled foreign corporation,” or CFC, for an uninterrupted period of 30
days or more during a taxable year, and that owns shares in the CFC directly or indirectly through foreign entities on the last day of the CFC’s
taxable year, must include in its gross income for United States federal income tax purposes its pro rata share of the CFC’s “subpart F income,”
even if the subpart F income is not distributed. A foreign corporation is considered a CFC if one or more 10% U.S. Shareholders together own
more than 50% of the total combined voting power of all classes of voting stock of the foreign corporation or more than 50% of the total value of all
stock of the corporation on any day during the taxable year of the corporation. A 10% U.S. Shareholder is a U.S. person, as defined in the Internal
Revenue Code, that owns at least 10% of the total combined voting power of all classes of stock entitled to vote of the foreign corporation. For
purposes of determining whether a corporation is a CFC, and therefore whether the more−than−50% and 10% ownership tests have been
satisfied, shares owned include shares owned directly or indirectly through foreign entities and shares considered owned under constructive
ownership rules. The attribution rules are complicated and depend on the particular facts relating to each investor. For taxable years in which we
are a CFC for an uninterrupted period of 30 days or more, each of our 10% U.S. Shareholders will be required to include in its gross income for
United States federal income tax purposes its pro rata share of our subpart F income, even if the subpart F income is not distributed to enable
such taxpayer to satisfy this tax liability. Based upon our existing share ownership, we do not believe we are a CFC.
We are incorporated under the laws of Bermuda, and the majority of our assets are located outside the United States, which may make it
difficult for shareholders to enforce civil liability provisions of the federal or state securities laws of the United States.
We are incorporated under the laws of Bermuda, and over 80% of our assets are located outside of the United States. It may not be
possible to enforce court judgments obtained in the United States against us in Bermuda or in countries, other than the United States, where we
have assets based on the civil liability provisions of the federal or state securities laws of the United States. In addition, there is significant doubt
as to whether the courts of Bermuda and other countries would recognize or enforce judgments of United States courts obtained against us or our
directors or officers based on the civil liabilities provisions of the federal or state securities laws of the United States or would hear actions against
us or those persons based on those laws. The United States and Bermuda do not currently have a treaty providing for the reciprocal recognition
and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or
state court in the United States based on civil liability, whether or not based solely on United States federal or state securities laws, would not
automatically be enforceable in Bermuda. Similarly, those judgments may not be enforceable in countries other than the United States where we
have assets.
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