Vistaprint 2011 Annual Report Download - page 34

Form 10-K
Risks Related to Our Corporate Structure
Challenges by various tax authorities to our complex international structure could, if
successful, increase our effective tax rate and adversely affect our earnings.
We are a Dutch limited liability company that operates through various subsidiaries in a number
of countries throughout the world. Consequently, we are subject to tax laws, treaties and regulations
in the countries in which we operate. Our income taxes are based upon the applicable tax laws and
tax rates in the countries in which we operate and earn income as well as upon our operating
structures in these countries. Many countries’ tax laws and international treaties impose taxation upon
entities that conduct a trade or business or operate through a permanent establishment in those
countries. However, these applicable laws or treaties are subject to interpretation. From time to time,
we are subject to tax audits and claims by the tax authorities in these countries that a greater portion
of the income of the Vistaprint N.V. group should be subject to income or other tax in their respective
jurisdictions. For more information about audits to which we are currently subject refer to Item 8 of
Part II, “Financial Statements and Supplementary Data — Note 10 — Income Taxes,” to our
consolidated financial statements included in Item 8 of this Annual Report. This could result in an
increase to our effective tax rate and adversely affect our results of operations.
A change in tax laws, treaties or regulations, or their interpretation, of any country in which we
operate could result in a higher tax rate on our earnings, which could result in a significant negative
impact on our earnings and cash flow from operations. We continue to assess the impact of various
international tax proposals and modifications to existing tax treaties between the Netherlands and
other countries that could result in a material impact on our income taxes. We cannot predict whether
any specific legislation will be enacted or the terms of any such legislation. However, if such proposals
were enacted, or if modifications were to be made to certain existing treaties, the consequences could
have a materially adverse impact on us, including increasing our tax burden, increasing costs of our
tax compliance or otherwise adversely affecting our financial condition, results of operations and cash
flows.
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 its subsidiaries. These agreements
establish transfer prices for production, marketing, management, technology development and other
services performed by these subsidiaries for 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 consistent with
those between unrelated companies dealing at arm’s length. With the exception of the transfer pricing
arrangements applicable to our Dutch, French and Australian operations, our transfer pricing
arrangements are not binding on applicable tax authorities and no official authority in any other
country has made a determination as to whether or not we are operating in compliance with its
transfer pricing laws. If tax authorities in any country were to successfully challenge our transfer
prices as not reflecting arm’s length transactions, they could require us to adjust our transfer prices
and thereby reallocate our income to reflect these revised transfer prices. A reallocation of taxable
income from a lower tax jurisdiction to a higher tax jurisdiction would result in a higher tax liability to
us. In addition, if the country from which the income is reallocated does not agree with the
reallocation, both countries could tax the same income, resulting in double taxation.
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