Landeskreditbank Baden-Württemberg - L-Bank

Foreign Source Income
Interest income (including any amounts deducted or withheld on account of foreign taxes) and original issue
discount on a Debt Security generally will constitute foreign source income, and generally will be considered
“passive” income (or, for certain U.S. Holders, “financial services” income) for purposes of computing the
foreign tax credit allowable under U.S. federal income tax laws. Under recently enacted legislation, for taxable
years beginning after December 31, 2006, interest income generally will constitute “passive category” income or,
in the case of certain U.S. Holders, “general category” income. The rules governing the foreign tax credit are
complex. U.S. Holders are urged to consult their tax advisors in this regard.
Withholding Taxes
In the event that foreign law requires the Issuer to deduct or withhold from payments on the Debt Securities,
the Issuer will not be required to pay a gross-up or any additional amounts. In such case, U.S. Holders will
recognize more income for U.S. federal income tax purposes than the actual amounts received from the Issuer.
Substitution of L-Bank
It is possible that a substitution of another company as principal debtor in respect of the Debt Securities will
cause a taxable exchange for U.S. federal income tax purposes of existing Debt Securities for new Debt
Securities by the holders of the Debt Securities. Such an exchange would require holders to recognize taxable
gain or loss for U.S. federal income tax purposes. In the event that such a substitution results in the recognition of
taxable income or gain to any holder, neither the Issuer nor the substitute obligor will be required to indemnify a
holder for any tax incurred by such holder as a result of such a substitution (see “Description of the Debt
Securities—Substitution of L-Bank”). Holders should consult their own tax advisers regarding the possible tax
consequences of a substitution of the Issuer including any tax consequences arising in any other taxing
jurisdiction.
U.S. Information Reporting and Backup Withholding
Payments of principal, premium, if any, and interest (including original issue discount) on, and proceeds
from the sale, retirement or other disposition of the Debt Securities may be subject to information reporting to the
IRS and possible backup withholding. Backup withholding of United States federal income tax at a current rate
of 28% may apply to payments made in respect of the Debt Securities to holders who are not exempt recipients
and who fail to provide certain identifying information (such as the holder’s taxpayer identification number) and
make any other required certification. Payments made in respect of the Debt Securities to a U.S. Holder must be
reported to the IRS, unless the U.S. Holder is an exempt recipient or otherwise establishes an exemption. U.S.
persons who are required to establish their exempt status generally must provide IRS Form W-9 (Request for
Taxpayer Identification Number and Certification). Non-U.S. Holders generally will not be subject to U.S.
information reporting and backup withholding. However, these Holders may be required to provide certification
of non-U.S. status (generally on IRS Form W-8BEN) in connection with payments received in the United States
or through certain U.S.-related financial intermediaries.
Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules from a
payment to a Holder may be credited against such Holder’s United States federal income tax liability and a
Holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the
IRS and furnishing all required information to the IRS in a timely manner.
Tax Return Disclosure Requirements
A U.S. Holder may be required to report a sale, retirement or other taxable disposition of its Debt Securities
on IRS Form 8886 (Reportable Transaction Disclosure Statement) if it recognizes a foreign currency exchange
loss that exceeds $50,000 in a single taxable year from a single transaction in the Debt Securities, if such U.S.
Holder is an individual or trust, or higher amounts for other non-individual U.S. Holders. U.S. Holders are
advised to consult their tax advisors in this regard.
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