Incredimail 2010 Annual Report Download - page 104

INCREDIMAIL LTD AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Various industrial programs of the Company have been granted "Approved Enterprise" and "Beneficiary Enterprise"
status, which provides certain benefits, including tax exemptions and reduced tax rates. Income not eligible for Approved
Enterprise and Beneficiary Enterprise benefits is taxed at a regular rate.
In the event of distribution of dividends from the said tax-
exempt income, the amount distributed will be subject to
corporate tax at the rate ordinarily applicable to the Approved Enterprise's income. The tax-
exempt income attributable to
the "Approved Enterprise" programs mentioned above can be distributed to shareholders without subjecting the Company
to taxes only upon the complete liquidation of the Company. Tax-
exempt income generated under the Company's
Beneficiary Enterprise program will be subject to taxes upon dividend distribution or complete liquidation. The
entitlement to the above benefits is conditional upon the Company's fulfilling the conditions stipulated by the Law and
regulations published thereunder.
Should the Company fail to meet such requirements in the future, income attributable to its Approved Enterprise and
Beneficiary Enterprise programs could be subject to the statutory Israeli corporate tax rate and the Company could be
required to refund a portion of the tax benefits already received, with respect to such programs. As of December 31, 2010,
management believes that the Company is in compliance with all the conditions required by the Law.
In 2009, the Company has revised its dividend policy whereby at least 50% of annual net income of the Company will be
paid out as a dividend beginning with the net income for 2009. Declaring and issuing the dividend will be subject to the
Board's review of the Company's financial condition at the time. As a result of the dividend policy, the Company records a
deferred tax liability with respect to its tax-
exempt income generated starting 2009 under its Beneficiary Enterprise plan,
since its distribution as dividend will create a tax liability to the Company. The Company does not intend to distribute
dividend out off tax exempt income incurred up to December 31, 2008. As a result, no deferred tax liability was created
with respect to approximately $8 million. Should this amount be distributed, it would be taxed at the reduced corporate tax
rate applicable to such profits (currently 25%), incurring as of December 31, 2010 an income tax liability of up to
approximately $2 million.
In November 2010 the Company's Board decided to change its dividend policy so that beginning with earnings of 2011
and beyond, the Company does not intend to distribute any dividends to the holders of its ordinary shares. This change to
the dividend policy had no effect on the deferred tax liabilities that were recorded in 2010, as the new dividend policy will
be in effect commencing with 2011 earnings.
In December 2010, the Law for Economic Policy for 2011 and 2012 (Amended Legislation) was passed, and among
others, amended the Investment Law, ("the amendment") effective January 1, 2011. According to the amendment, the
benefit tracks in the Investment Law were modified and a flat tax rate applies to the Company's entire preferred income.
The Company will be able to opt to apply (the waiver is non-
recourse) the amendment and from then on it will be subject
to the amended tax rates as follows: 2011 and 2012 - 15%, 2013 and 2014 - 12.5% and in 2015 and thereafter - 12%.
NOTE 9:
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INCOME TAXES
a.
Tax benefits under the Israel Law for the Encouragement of Capital Investments, 1959 (the "Law"):
F
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