Taro Provides Shareholders with Procedures Regarding Israeli Withholding Tax on Dividend

HAWTHORNE, N.Y.--(BUSINESS WIRE)-- Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) announced today an explanation regarding taxation on the $500 million Special Dividend payable on December 28, 2018 to shareholders of record at the close of business on December 11, 2018. The ex-dividend date will be December 10, 2018.

Following the announcement by the Company on November 5, 2018, that it will pay a $500 million dividend (the “Dividend”) on December 28, 2018, and in accordance with a specific tax ruling that the Company has received from the Israeli Tax Authority (“ITA”), the Company would like to elaborate about the procedures whereby Israeli taxes will be withheld from the Dividend payment, based on conditions set by the ITA in the tax ruling.

Neither the Company nor its Tax Trustee will provide tax advice to shareholders regarding their substantive tax liability or their ability to claim a refund of Israeli withholding tax. Shareholders should consult their own tax advisors as to the United States, Israeli or other tax consequences of the payment of the Dividend and the impact of any foreign, state or local taxes.

This press release will be filed with the Securities and Exchange Commission on Form 6-K and will also be accessible on Taro’s website at www.taro.com.

Attached is a sample of the letter to be distributed Taro shareholders subsequent to the record date.

SAFE HARBOR STATEMENT

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements that do not describe historical facts or that refer or relate to events or circumstances the Company “estimates,” “believes,” or “expects” to happen or similar language, and statements with respect to the Company’s payment of the Special Dividend, Israeli taxes withheld from the Dividend payment, and potential to receive a claim for reduced rate of withholding tax. Although the Company believes the expectations reflected in such forward-looking statements to be based on reasonable assumptions, it can give no assurances that its expectations will be attained. Factors that could cause actual results to differ include general domestic and international economic conditions, industry and market conditions, changes in the Company’s financial position, litigation brought by any party in any court in Israel, the United States, or any country in which Taro operates, regulatory and legislative actions in the countries in which Taro operates, and other risks detailed from time to time in the Company’s SEC reports, including its Annual Reports on Form 20-F. Forward-looking statements are applicable only as of the date on which they are made. The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

About Taro

Taro Pharmaceutical Industries Ltd. is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. For further information on Taro Pharmaceutical Industries Ltd., please visit the Company’s website at www.taro.com.

**Taro Shareholder Letter Follows**

December 7, 2018

Dear Taro Shareholder,

Re: Taxation of the Dividend Payable on December 28, 2018

Following the announcement by Taro Pharmaceutical Industries Ltd. (the “Company”) on November 5, 2018 that it will pay a $500 million dividend ( the “Dividend”) on December 28, 2018 and in accordance with a specific tax ruling that the Company has received from the Israeli Tax Authority (“ITA”), we would like to elaborate about the procedures whereby Israeli taxes will be withheld from the Dividend payment, based on conditions set by the ITA in the tax ruling (the “ITA Conditions”):

1. The Company has appointed IBI Trust Management, located at Ehad Ha’am 9 Tel Aviv (Shalom Tower); e-mail address IBI-CM@IBI.co.il; phone number +972 506 209 410 as its trustee/ sub-paying agent (the “Tax Trustee”), in compliance with the ITA Conditions.
2. On the dividend payment date, December 28, 2018, the Company shall withhold 15.09% (the “Withheld Tax Rate”) of the gross amount of the Dividend. The Company shall transfer such amount to the Tax Trustee by January 1, 2019. The remaining amount of the Dividend (84.91%) shall be paid to shareholders by the American Stock Transfer & Trust Company, LLC (the Company’s stock transfer agent) or the relevant broker for shares held in street name.

3. Any shareholder of the Company who is: (i) a resident of a country with which Israel has a treaty for the avoidance of double taxation and (ii) has an equitable right to receive the Dividend (an “Applicant”), may apply to the Tax Trustee, from the Dividend payment date until February 14, 2019, and request that the withholding tax rate that shall apply to his share of the Dividend payment be reduced in accordance with a relevant tax treaty (the “Application”).

   It is important to note that only residents of countries that have a treaty with Israel that provides for a tax rate that is lower than the Withheld Tax Rate should file an Application for reduced withholding. In general, the treaty between Israel and the U.S. provides for a higher tax rate than the Withheld Tax Rate, so there would generally not be a reason for US resident shareholders of the Company to submit an application. The treaties between Israel and some other countries (including, but not limited to, Germany, France, the UK and China) generally provide for a withholding tax rate that is lower than the Withheld Tax Rate so residents of such countries should consider whether they want to submit an Application.

4. In order to submit an Application, the Applicant shall submit to the Tax Trustee the documents listed in Attachment A.
5. The Tax Trustee shall review all of the Applicant’s documents, as well as any other document which may be required in order to establish the Applicant’s eligibility for a reduced tax rate. If an Applicant’s documents are insufficient, the Tax Trustee may revert to the Applicant with questions or requests for additional documents.
6. Upon an Applicant’s satisfactory submission of the required documents, the Tax Trustee shall transfer to the Applicant’s designated bank account a tax refund in the amount by which the Withheld Tax Rate exceeds the tax rate actually due from the Applicant under the applicable tax regime.
7. The above-mentioned application process is only a “fast track” that has been made available to shareholders to avoid an excessive tax withholding that exceeds the tax that should have been withheld from their Dividend payments based on their entitlement to the benefits of a tax treaty. It neither affects, in any way, the substantive tax liability of any shareholder nor does it derogate from a shareholder’s right to file a tax return with the Israeli tax authority to seek a refund of over withheld amounts.

Neither the Tax Trustee nor the Company will provide tax advice to Applicants regarding their substantive tax liability or their ability to claim a refund of Israeli withholding tax. Applicants should consult their own tax advisors as to the United States, Israeli or other tax consequences of the payment of the Dividend and the impact of any foreign, state or local taxes.

Appendix A

Taro Pharmaceutical Industries Ltd. Dividends Distribution

CLAIM FOR REDUCED RATE OF WITHHOLDING TAX

IN ISRAEL ON DIVIDEND PAYMENTS TO A NON-ISRAELI TAX RESIDENT

You are receiving this form “Declaration of Status for Israeli Income Tax Purposes” as a holder of ordinary shares (the “Shares”) of Taro Pharmaceutical Industries Ltd. (“Taro”), in connection with the payment of a special cash dividend to the shareholders of Taro which will be paid in December 2018.

By completing this form in a manner that would substantiate your eligibility for a reduced rate of Israeli withholding tax with respect to this dividend distribution, you will allow Taro and its Israeli tax agent to withhold tax in Israel from the dividend distribution made to you at a reduced tax rate.

This form shall be completed and signed by the recipient of the dividend or by an authorized officer or representative of the recipient.

This claim is made pursuant to the Double Tax Convention between Israel and the country of residence of the recipient of the dividend.

PART A: RECIPIENT DECLARATION

RECIPIENT INFORMATION

With regard to an Individual:

I declare that I am not an Israeli resident because (please mark all applicable boxes):

With regard to a Legal Entity:

I declare that the Legal Entity is a non - Israeli resident because (please mark all applicable boxes):

DETAILS OF INCOME RECEIVED

Place of receipt (country, city, bank account number, Amount)

The recipient declares that all the information provided above is accurate and complete.

PART B: CERTIFICATION OF FOREIGN INCOME TAX AUTHORITY¹

This part shall be completed and signed by the income tax authorities of the recipient’s place of residence

1. I certify that:

a. the recipient of the income is a fiscal resident of (insert country) ____________; according to the tax treaty between Israel and ________.

b. the recipient regularly reports his income as required, the most recent income tax return filed being for the year _____________;

c. the income concerned ❏ is/ ❏ is not subject to tax in (insert the recipient’s country of residence) ___________________.

2. Address of certifying official: __________________________________________

3. Position or Title of certifying official: ____________________________________

4. Name of Income Tax Authority official making this certification: _______________

____________________________________________________________________
¹ A residency certificate issued by the tax authority of the Applicant’s country of residence may substitute for this Part B.

PART C: DOCUMENTATION

Applicants who are Individuals – please attach the following documents:

1. Copy of passport or identity card issued by the country of tax residency of shareholder.
2. Bank or brokerage statement from the dividend record date including details of the account holder, bank or brokerage name and account number and the number of listed shares held by the shareholder.
3. Bank or brokerage statement from the date of payment of the dividend, including details of the account holder, account number and the amount of the dividend received.
4. Residency certificate issued by the Applicant’s country of residence for the purposes of the tax treaty between Israel and the Applicant’s country of residence.

Applicants who are Legal Entities – please attach the following documents:

1. Copy of Certificate of Incorporation issued by the country of tax residency of shareholder.
2. For private companies, (i) a list of shareholders of the Legal Entity; and (ii) list of the direct and indirect individual shareholders, their ownership percentages and declarations regarding their country of residency for tax purposes. Such list must include at least 75% total ownership of the Legal Entity.
3. For public companies or direct or indirect subsidiaries of public companies, a statement declaring the Legal Entity’s country of residence.
4. Bank or brokerage statement as of the dividend record date including details of the account holder, bank or brokerage name and account number and the number of listed shares held by the shareholder.
5. Bank or brokerage statement as of the date of payment of the dividend, including details of the account holder, bank or brokerage account number and the amount of the dividend received.
6. Residency certificate issued by the Applicant’s country of residence for the purposes of the tax treaty between Israel and the Applicant’s country of residence.

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