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

Full name of the recipient:

 

For Individuals:

Identity Number, Social
Security
No., or Passport No.

_______________________

For Legal Entities:

Registration
No. /Corporation No.
_______________________

 

Type of Investor:
Legal Entity ❏
Individual ❏
Trust
Beneficiary ❏

With respect to an individual

With respect to a legal entity

Date of birth: _______________________

The country in which it was incorporated:
_______________________

The country in which control and management are conducted:
_______________________

Country of residence: _______________________

Country of citizenship: _______________________

Country issuing passport: _______________________


Income Tax File or tax identification number of the recipient in
place of residence: __________________

Address of local income tax assessing office in recipient’s place
of residence:


The recipient is a fiscal resident of (insert country)
_____________________________ since (insert date)________________.

Permanent Address (country, city, street, house or apartment
number):

Mailing Address:

Investor’s Telephone number:

 

Telephone number of authorized signatory:

 

With regard to an Individual:

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

 

1.

 

The State of Israel is not my permanent place of residence.

 

2.

 

The State of Israel is neither my place of residence nor my family’s
place of residence.

 

3.

 

My ordinary or permanent place of activity is not within the State
of Israel, and I do not have a permanent establishment in the State
of Israel.

 

4.

 

I do not engage in any occupation within the State of Israel.

 

5.

 

I do not own a business or part of a business within the State of
Israel.

 

6.

 

This year, I did not stay, and I do not intend to stay in Israel for
183 days or more.

 

7.

 

This year, I did not stay in Israel and I also do not intend to stay
in Israel for 30 days or more and my total stay in Israel this year
and in the two preceding years will not reach 425 days.

 

8.

 

I am not insured with the National Insurance Institute in the State
of Israel.

 

9.

 

I am the sole beneficial owner of the dividend income.

 

10.

 

I do not hold the shares directly or indirectly for the benefit of
another person.

 

11.

 

The income is not attributable to a place of business or permanent
establishment located in a country other than my country of
residence.

 

With regard to a Legal Entity:

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

 

1.

 

Over 75% of the shareholders are individuals with the same residency
as the Legal Entity (attach a declaration of shareholders)

 

2.

 

It is not registered /incorporated with the Registrar of Companies
in Israel.

 

3.

 

It is not registered with the Registrar of non-profit organizations
in Israel. (Amutot)

 

4.

 

The control of the legal entity is not in Israel.

 

5.

 

The management of the legal entity is not in Israel.

 

6.

 

The legal entity does not have a permanent enterprise in Israel
and the entity does not have a permanent establishment in the
State of Israel

 

7.

 

No Israeli resident holds, directly or indirectly via shares or
through a trust or in any other manner, alone or with another who
is an Israeli resident, one or more of the means of control of the
legal entity, as specified below, at a rate exceeding 25%. The
term “means of control” refers to the following:

(a)  
the right to participate in profits;
(b)   the right to
appoint a director;
(c)   the right to vote;
(d)
  the right to share in the assets of the entity at the time of
its liquidation;
(e)   the right to direct the manner of
exercising one of the rights specified above.

 

8.

 

The legal entity is the sole beneficial owner of the dividend income.

 

9.

 

The entity does not hold the shares directly or indirectly for the
benefit of another person.

 

10.

 

The income is not attributable to a place of business or permanent
establishment located in a country other than country of residence.

 

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
AUTHORITY
1

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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