| Foreign Exchange Regulations
Dividends,
if any, paid to the holders of the ordinary shares,
and any amounts payable upon dissolution, liquidation
or winding up, as well as the proceeds of any sale in
Israel of the ordinary shares to an Israeli resident,
may be paid in non-Israeli currency or, if paid in Israeli
currency, may be converted into freely repatriable dollars
at the rate of exchange prevailing at the time of conversion.
UNITED STATES FEDERAL INCOME
TAXES
The
following summary sets forth the material United States
federal income tax consequences applicable to the following
persons who purchase, hold or dispose of the ordinary
shares ("U.S. Shareholders"); (i) citizens or residents
(as defined for U.S. federal income tax purposes) of
the United States; (ii) corporations or other entities
taxable as corporations created or organized in or under
the laws of the United States or any state thereof;
(iii) estates, the income of which is subject to United
States federal income taxation regardless of its source;
and (iv) trusts, if (a) a U.S. court is able to exercise
primary supervision over its administration and (b)
one or more U.S. persons have the authority to control
all of its substantial decisions. This discussion is
based on the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), United States Treasury
Regulations promulgated thereunder and administrative
and judicial interpretations thereof, all as in effect
as of the date of this Annual Report on Form 20-F. This
discussion generally considers only U.S. Shareholders
that will hold the ordinary shares as capital assets
and does not consider (a) all aspects of U.S. federal
income taxation that may be relevant to particular U.S.
Shareholders by reason of their particular circumstances
(including potential application of the alternative
minimum tax), (shareholders subject to special treatment
under the U.S. federal income tax laws, such as financial
institutions, insurance companies, broker-dealers ,
tax-exempt organizations and foreign individuals or
entities, (c) U.S. Shareholders owning directly or by
attribution 10% or more of the Company's outstanding
voting shares, (d) U.S. Shareholders who hold the ordinary
shares as part of a hedging, straddle or conversion
transaction, (e) U.S. Shareholders who acquire their
ordinary shares in a compensatory transaction, (f) U.S.
Shareholders whose functional currency is not the dollar,
or (g) any aspect of state, local or non-United States
tax law.
The
following summary does not address the impact of an
investor's individual tax circumstances. Accordingly,
each investor should consult his or her own tax advisor
as to the particular tax consequences to him or her
of an investment in the ordinary shares, including the
effects of applicable state, local or foreign tax laws
and possible changes in the tax laws.
Dividends Paid on the Ordinary
Shares
A U.S.
Shareholder generally will be required to include in
gross income as ordinary dividend income the amount
of any distributions paid in respect of the ordinary
shares (including the amount of any Israeli taxes withheld
therefrom) to the extent that such distributions are
paid out of the Company's current or accumulated earnings
and profits as determined for U.S. federal income tax
purposes. Distributions in excess of such earnings and
profits will be treated first as non-taxable return
of capital reducing the U.S. Shareholder's tax basis
in the ordinary shares to the extent of the distributions,
and then as capital gain from a sale or exchange of
such ordinary shares. Such dividends, generally will
not qualify for the dividends received deduction available
to corporations. The amount of any cash distribution
paid in NIS will equal the U.S. dollar value of the
distribution, calculated by reference to the spot exchange
rate in effect on the date of the distribution.
Credit for Israeli Taxes
Withheld
Subject
to certain conditions and limitations, any Israeli tax
withheld or paid with respect to dividends on the ordinary
shares generally will be eligible for credit against
a U.S. Shareholder's United States federal income tax
liability at such U.S. Shareholder's election. The Code
provides limitations on the amount of foreign tax credits
that a U.S. Shareholder may claim, including extensive
separate computation rules under which foreign tax credits
allowable with respect to specific categories of income
cannot exceed the United States federal income taxes
otherwise payable with respect to each such category
of income. U.S. Shareholders that do not elect to claim
a foreign tax credit may instead claim a deduction for
Israeli income tax withheld or paid, but only for a
year in which these U.S. Shareholders elect to do so
for all foreign income taxes. Dividends with respect
to the ordinary shares generally will be classified
as foreign source "passive income" for the purpose of
computing a U.S. Shareholder's foreign tax credit limitations
for U.S. foreign tax credit purposes. The rules relating
to foreign tax credits are complex, and you should consult
your tax advisor to determine whether and if you would
be entitled to this credit.
Disposition of the Ordinary
Shares
The
sale or exchange of ordinary shares generally will result
in the recognition of capital gain or loss in an amount
equal to the difference between the amount realized
on the sale or exchange and the U.S. Shareholder's tax
basis in the ordinary shares. Such gain or loss generally
will be long-term capital gain or loss if the U.S. Shareholder's
holding period of the ordinary shares exceeds one year
at the time of the disposition. Gain or loss recognized
by a U.S. Shareholder on a sale or exchange of ordinary
shares generally will be treated as U.S. source income
or loss for U.S. foreign tax credit purposes. Under
the tax treaty between the United States and Israel,
gain derived from the sale, exchange or other disposition
of ordinary shares by a holder who is a resident of
the United States for purposes of the treaty and who
sells the ordinary shares within Israel may be treated
as foreign source income for U.S. foreign tax credit
purposes. |
