FORM 20-F - Check Point

converted into freely repatriable U.S. dollars at the rate of exchange prevailing at the time of conversion. In
addition, the statutory framework for the potential imposition of exchange controls has not been eliminated, and
may be restored at any time by administrative action.
Taxation of Non-Israeli Shareholders on Receipt of Dividends
Under Israeli tax law, a distribution of dividends from income attributable to an Approved Enterprise or
Privileged Enterprise will be subject to tax in Israel at the rate of 15%, which is withheld and paid by the company
paying the dividend, if the dividend is distributed during the benefits period or within the following 12 years (this
limitation does not apply to a Foreign Investors Company). Any distribution of dividends from income that is not
attributable to an Approved Enterprise or Privileged Enterprise will be subject to tax in Israel at the rate of 25%,
except that dividends distributed to an individual who is deemed “a non-substantial shareholder” will be subject to
tax at the rate of 20%.
Under the United States-Israel tax treaty, the maximum tax on dividends paid to a holder of ordinary shares
who is a United States resident is 25%. Dividends received by a United States company that holds at least 10% of
our voting rights, will be subject to withholding tax at the rate of 12.5%, provided that certain other conditions in
the tax treaty are met (or at the tax rate of 15% in respect of dividends paid from income attributable to our
Approved Enterprises or Privileged Enterprise). Dividends distributed to other foreign shareholders may be subject
to different withholding tax rates based on the applicable tax treaty.
Capital Gains Taxes Applicable to Non-Israeli Shareholders
Capital gains from the sale of our ordinary shares by non-Israeli shareholders are exempt from Israeli
taxation under the Israeli domestic tax law, provided that the capital gain is not derived from a permanent
establishment in Israel. In addition, the United States-Israel tax treaty exempts United States residents who hold
less than 10% of our voting rights, and who held less than 10% of our voting rights during the 12 months prior to a
sale of their shares, from Israeli capital gains tax in connection with such sale.
United States Federal Income Tax Considerations
The following discussion describes the material U.S. federal income tax considerations relating to the
ownership or disposition of our ordinary shares to a holder who is:
� A citizen or resident (as defined for U.S. federal income tax purposes) of the United States;
� A corporation, or other entity taxable as a corporation, created or organized in or under the laws of
the United States or any of its states;
� An estate, if the estate’s income is subject to U.S. federal income taxation regardless of its source;
or
� A trust, if a U.S. court is able to exercise primary supervision over its administration and one or
more U.S. persons (e.g., a U.S. citizen, resident, or corporation) have the authority to control all of
its substantial decisions.
We refer to any of the above as a “U.S. Shareholder”.
This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended, referred to as
the “Code”, U.S. Treasury Regulations promulgated under the Code and administrative and judicial interpretations
of the Code, all as in effect as of the date of this Annual Report on Form 20-F. This discussion generally considers
only U.S. Shareholders who will hold the ordinary shares as capital assets. The discussion does not consider:
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