Vistaprint 2009 Annual Report Download - page 44

enables us, among other things, to calculate our taxable profits attributable to the French subsidiary as
a fixed percentage of the subsidiary’s expenditures using the “cost-plus” method. For the purposes of
this ruling, a “headquarters” is a French subsidiary of a company registered outside of France that
operates within a multinational group of companies. The headquarters’ activities must involve providing
the functions of executive management, management, coordination or control, for the sole benefit of
the group. If we are unable to adhere to the terms of the French headquarters ruling, the French tax
authorities may revoke the ruling and the result may be an increase in our effective corporate tax rate.
If this were to occur, our expenses may increase significantly beyond what we anticipate and our
business and results of operations would be adversely impacted.
We are subject to changing tax laws, treaties and regulations in and between countries in which
we and our subsidiaries operate or are resident, including, among others, treaties between the United
States, countries in the European Union, Canada and other countries. These tax laws, treaties and
regulations are highly complex and subject to interpretation. U.S. corporations are subject to United
States federal income tax on the basis of their worldwide income. Non-U.S. corporations generally are
subject to United States federal income tax only on income that has a sufficient nexus to the United
States. On October 22, 2004, the United States enacted the American Jobs Creation Act of 2004, or
the AJCA. Under the AJCA, non-U.S. corporations that after March 4, 2003 complete the acquisition of
substantially all of the properties of a U.S. corporation and that meet certain ownership, operational
and other tests are treated as U.S. corporations for United States federal income tax purposes and,
therefore, are subject to United States federal income tax on their worldwide income. The
amalgamation of our predecessor U.S. corporation with Vistaprint Limited, our Bermuda subsidiary and
our parent company prior to our redomestication to the Netherlands, occurred in April 2002. The AJCA
grants broad regulatory authority to the Secretary of the Treasury to provide regulations as may be
appropriate to determine whether a non-U.S. corporation is treated as a U.S. corporation. We do not
believe that the relevant provisions of the AJCA as currently enacted apply to Vistaprint N.V., but there
can be no assurance that the United States Internal Revenue Service will not challenge this position or
that a court will not sustain any such challenge. Furthermore, at various times during the last few years
there have been legislative proposals in the U.S. Congress which, if enacted into law, would
retroactively change the March 4, 2003 AJCA measurement date to March 20, 2002. A successful
challenge by the Internal Revenue Service, or a change of the March 4, 2003 date in the AJCA to an
earlier date, could result in Vistaprint N.V. being subject to tax in the United States on its worldwide
income, which would increase our effective rate of tax and adversely affect our results of operations.
Similarly, there have been other legislative proposals introduced in the United States Congress from
time to time that seek to impose taxes and similar obligations and restrictions on foreign companies
with operations in the United States, such as by classifying certain foreign corporations that are
managed and controlled primarily in the United States as domestic corporations for U.S. tax purposes.
We cannot predict whether these or other similar legislative proposals will become law. If any such
legislative proposals become law and are deemed to apply to Vistaprint N.V., our effective tax rate
could increase and our results of operations could be materially adversely affected.
Our intercompany arrangements may be challenged, resulting in higher taxes or penalties and
an adverse effect on our earnings.
We operate pursuant to written intercompany service and related agreements, which we also
refer to as transfer pricing agreements, among Vistaprint N.V. and our subsidiaries. These agreements
establish transfer prices for printing, marketing, management, technology development and other
services performed by these subsidiaries for Vistaprint N.V. and other group companies. Transfer
prices are prices that one company in a group of related companies charges to another member of the
group for goods, services or the use of property. If two or more affiliated companies are located in
different countries, the tax laws or regulations of each country generally will require that transfer prices
be the same as those between unrelated companies dealing at arm’s length. With the exception of the
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