lllllllllilllilllllllllill"''"' §!}ERNST & YOUNG - The Irish Times
llllll lllilll illlllllllill"''"' §!}ERNST & YOUNG
Ernst & Younq Tax A dvisory Ser vices Sociét é à responsabil it é limit ée 7, rue Gabriel Lippmann Parc d'Ac t ivit é Syrdall 2 L·5365 Munsbach B.P. 7BO L·2017 Luxembourg Tel: +352 42 124 1 fax : + 352 42 124 5555 ww1·1.ey.com/luxembourg R.C.S. Luxembourg B 88 073 TVA LU 19236233 Capital soc ial : Eur 12.400
Please fi nd attac hed a PDF copy of the advance tax clearance obtained for our Clients Skype Tec hnologies SA, Skype Commun icat ions Sàrl and Spr ingboard lnvest ment s Sàr l. Th is clear ance shou ld not be relied upon by any other party for any other pur pose wit hout t he expr ess written auth orisati on of Ernst & You ng Tax Advisory Services S.à r.I. Luxembou rg. Ern st & Young Tax Ad vi sor y Services S.à r.I. and its employees neit her owe nor accept any duty of care or responsibi lit y to any oth er par ty, whether in contract or in tort (including wi thou t limi ta t ion, negligence and brea ch of stat utory duty) or however ari sing , and shall not be liable in respec t of any loss. damage or expense of w hatever natu re, which is ca used to the client or to any other part y as a r esult o f t he distr ibution or availability of the clearance .
gg ERNS T& YOUNG
A mcmbcr r1rm of Ernst & Young Global L1m1ted
lllllll lJlll lllllllllllllll'"'" i!/ ERNST & YOUNG
Ern st & Younq Tax Advi sor y Se rv ices Soc iét é à respon sabilit é li mi t ée 7, Parc d'Activité Syr dall L·5365 Mu nsbac h B.P. 780 L·2017 Luxembou rg Tel: +352 42 124 1 Fax: +352 42 124 5555 www.ey.com/luxembourg
Adm inistration des Contribut ions Dir ectes R.C.S. Luxembourg B 88 073 TVA LU 19236233 Bureau d'imposition Sociétés VI ...-------------1;.a~· al social: Eur: 12.400 Mr. Marius Kohl BUREAU D'IMPOSITION SOC. 6 18, rue du Fort Wedell ENTR EE L-29 82 Luxembourg
PY
Lux emb ourg, 11 Nove mber 20 10
Object : Name of th e operat ional group : Name of th e project : Releva nt Luxembourg compa nies bein g part of th e restru cturing :
Amount of the inves tment : Key words :
Skype At omico/ Joltid Skype Techn ologies SA Tax number : (2 003 2223 525) Skype Communica t ions Sàrl Tax number : (2005 2435 138) Springb oa r d ln ves tments Sà rl Tax number : (2009 2434 541 ) US D 10 millions Tax transpa rency lnt erest Free Trackin g Loan
Dear Mr. Kohl, The group Skyp e (her ea fter "th e Gro up") mandated us with th e tax co nsult ing in respect of a contemplated legal structur ing the mai n objectives and steps of wh ich will be described in chronolog ical ord er below . The present letter aims at depicting our analysis of the tax t reatment to be appli ed and wh ich wi ll be r eflected in t he tax ret urns of the group compa nies accordin gly.
A m1,;rrtE:r 'r
cf [ n t .s;. Your.g {
b
L
• d
___.,,,, 1111111 11111111 111111111111111•· ·· · ~ERNST & YOUNG
1.
Genera l co ntext
ln November 2009, Skype acquired from Joltid the intellec tual property righ ts to technology that fac il itates commun icati ons in the peer-to-peer network of Skype users. Skype acquired this t echnology as part of a settlement reached with Joltid in which ail ou t standing litiga tion between the parties was reso lved . An agreement was reached in connection with this settlement requ iri ng Skype to commit USD 10 million to A t omico LP. Atom ico LP aims to ach ieve superior returns from investments primarily in eq uity and equityre lated securities, principally in European-re lated t echno logy, med ia and telecommunication businesses. As of March 22, 2010, Atom ico LP had raised USD 165 milli on t o invest in early stage, high growth technology companies. We refer to the letter dated Februar y 8, 2010 regarding the tax treatment appl ica ble t o the acquisition of the Skype group by Silver Lake Partners and a conso rtium of investors as well as to our letter dated June 14, 2010 regarding the tax treatmen t of the restructuring of t he Skype Luxembourg entities. We also r efer to the discussions held during our meetin g of June 14, 2010 . Il .
Description of the acqui sit i on struct ure
Step 1:
On November 18, 2009, Springboard Acqu isitions Sàrl incorporated a new Luxe mbou rg private limited liabi lity company, Springboa rd lnvestments Sàrl, with a share capita l of USD 20,000.
Step 2:
On December 30, 2009 , t he shares in Springboard lnvestmen ts Sà rl have been contributed down the cha in to Skype Commun ica tions Sàrl in exchange for sha res .
St ep 3:
On April 1, 20 10, Skype Ltd ( lreland) granted an int eres t free tracking loan faci lity (hereafter "IFTL") to Sp ringboard lnvestm ents Sàrl for an amount of USD 10 mill ion in order for th e latter to fund the investm ent in Atom ico LP. At th e leve l o f Skype Ltd (lreland), the funding has been made by draw ing down an existing intercompany balance w ith Skyp e Techno logies S.A. (i. e. a payable owed by Skype Technolog ies SA to Skype Ltd (lreland)).
Step 4:
On Apri l 2, 20 10, Springboard lnvest ment Sàrl drew down an USD amou nt equivalent to EUR 1,093 ,833.55 under the IFTL agreement in order to fund its investment in Atomico LP.
Please find in Append ix 1th e simplified struc ture of th e Group after t he acqu isition of the investment in A tom ico LP.
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Ë!f ERNST & YOUNG
Ill.
Tax trea tm ent
1.
Characterizatio n of Atomico LP from a Lu xemb ourg t ax perspect ive
According t o t he Parliamentary work in relation to article 114 of t he draft Law 571-4, the qua lificat ion of a foreign entity as opaque or transparent, for Luxembourg tax purpos es, should be determined based on the compar ison between th e legal charac ter isti cs of the foreign entity and t he ones of sim il ar legal fo r ms existing und er Luxembourg law. According to the Limit ed Partnership Agreement1, Atomico LP has the foll ow ing main legal featu res: •
Capita l accounts: Th ere shall be established on t he books of Atomico LP a capita l account for each Pa r t ner that shal l be (a) increased by any cap ital contributions made t o A tomico LP by such Partner and any amounts in th e nature of incarne or ga in added to the capital accou nt of such Partner and (b) decreased by any distributions made to such Partn er and any amount in the nature of loss or expense subtracted from the capital accoun t of such Partner.
•
Distribu t ions: Distributions shall be made t o Partn ers in proportion to their r espective contributions .
•
Transfer abi litY- of interest: The General Partner shall not assign , mo rtgage, hypothecate , give, -sell or otherwise dispose of or encumb er ail or any part of its interes t as Gen eral Partner in Atomico LP except (a) in con necti on w ith th e change or rest ructu ri ng of th e form of legal en tity of the General Pa rtn er or (b) with the consent of 66-2/3% in int er est of Atomico LP investors. ln addition, the transfer of a Limited Pa rtner' s int er est in Atom ico LP shall only be made if th e transferor, the tran sf eree(s) and the General Partner agree in writin g and shall be lim ited to the cases explic itly for eseen in t he Limited Partnership Agr eement.
•
Management and co ntrai: The management, policies and con tra i of Atomico LP sha ll be vested exclusi vely in th e General Partn er.
•
Term of Part ners hi p: The t erm of Atom ico LP shall co ntinue un til th e 1 oth anniversary of th e da t e th at is 12 months after the dat e at whi ch the init ial cap ital contr ibut ions of the Partners sha ll be du e, unless Atomico LP is sooner wound up or dissolved as provided in arti cle 9 .2 ( i.e. dissolu tion upon an event of with drawal of th e Genera l Pa rtn er , listed in th e Ex empt ed Limi ted Partnership Law of the Ca yman Islands) or 9 .3 ( i.e., main ly, with the consent of a quali fying majority of Partn ers) or by operation of law.
Based o n th e above, the legal characteristics of Atomico LP are largely similar to th ose of a Luxemb our g li mited partn ershi p. Therefo re, Atomico LP is to be co nsidered as a tax transparent ent it y from a Luxembourg direc t tax perspective .
1
Please find in Enclosure 1 a copy o f the Second Amended and Restated Limited Par tne rship Agreement of Atomico Ventures Il, L P dated Decem ber 3, 2009.
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~ 11111 1111111 1111111111111111'""
i!/ ERNST & YOUNG
As a result of the t ax transparency of A t omico LP, the shares / interest held by the la tt er wi ll, fro m a Luxembourg tax perspective, be considered as directly held by Spri ngboa r d lnvestments Sà rl and t hus, any income in connection with these shares / interest will be considered as directly de rived by Springboard lnvest ments Sàrl according toit s pro fi ts entitlemen ts as set ou t in the Limited Partnership Agreement. for Lu xembourg tax purposes. 2.
Tax treatment of the IFTL granted by Skype Ltd ( lreland) to Springboard lnvestments Sà rl
The IFTL 2 granted by Skype Ltd (l reland) to Springboard lnvestme nts Sàrl has the fo ll ow ing c haracte ri stics : • •
• • • • •
•
Th e IFTL has a long -term maturity (i.e. 30 years) and a fixed repayment dat e (i. e. Ap ril 1, 2040). The reim bursement of the advances under t he IFTL shall be limite d recou rse (a nd any claim by Sky pe Ltd (l reland) sha ll be limi ted) t o t he inves tm ent s in Atomico LP and any amounts rece ived by (and availab le t o) Springboa rd lnvestme nts Sàrl und er its investments in Atomico LP. None of the adva nces unde r the IFTL shall bear any inter est. Th e IFTL is denomina te d in USD. The proceeds of each advance under th e IFTL facil ity shall be applied t owards fu nding inves tments of Spring board lnvestments Sàrl in Atomico LP. The IFT L may be fully or parti ally prepaid by Springboard lnvestments Sà rl upon prior notice to Skyp e Ltd ( lr eland). Skype Ltd Clreland) may req uire r epayment upon 5 business day notice in case of the imminent loss of Springboard lnvestm ents Sàrl's pos it ion as a direct or ind irect wholly own ed subsidiary o f Skype Global Sà rl. No subo rdination clause is fo resee n.
The IFTL w ill be treated as debt from a Luxembo urg acco unting and lega l perspectiv e. As a consequ ence, acco rdin g t o art icle 40 of th e Lu xembourg Inca rne Tax Law (herea fter " ITL") and paragraph §62(1) of the valuation law (BewG), the IFTL wi ll be treated as a debt of Springboard lnvestment s Sà rl towards Skype Ltd (lrel and) for Lu xembourg tax pur poses. A loa n that does not bear interest. such as th e IFTL, does no t comp ly w ith the ar m's length principle. Th er ef ore, a nati onal int er es t expense wil l be imput ed on t he IFTL , at the level of Spri ngboa rd lnvest ments Sà rl. This nationa l interest will be equal t o 100% of the net incarne derived from the shares / int eres t held by Spring boa r d lnvestm ents Sà rl through A t omico LP (inc lu ding but not limited to dividends, ca pital gain s, li quid ation proceeds or f oreig n exchange gain s) less a gross marg in of Y4 %. Thi s national interest expense on th e IFTL will be deductible from th e taxable basis of Springboa r d lnvestme nts Sàrl and wil l not be subjec t to withh oldi ng tax in Luxembourg.
2
Please find in Enc losure Il a copy of the lnteres t Free Trac king Loan Fac ili ty ag reement ente red into between Springboard lnvestmen ts Sàrl and Skype Ltd (lreland).
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The deemed interest paid by Springboard ln vestments Sàrl will be considered as generating an income at the level of Skype Ltd. At the time Sprin gboard lnvestments Sàrl w ill distribute dividend toits shareholder (i .e. Skype Communications Sàrl), the deemed interest income will be considered as distributed by Skype Ltd toits so le shareholder (i.e. Skyp e Tec hnologies SA) and then contri buted fr om the la t ter to Skype Communications Sàrl and then from the latter t o Springboard lnvest ments Sàrl by way of an informai capital contribution . Th e hidden dividend distribu tion fro m Skype Ltd ( lrelan d) to Skype Techno logies SA will be exempt fro m Luxembourg corporate income tax (herea ft er "CIT") and municipal business tax (hereaft er " MBT") according to the provisions of article 166 (2) ( 1) ITL. ln addition, the hidden capital con tribution from Skype Tech nologies SA to Skype Communicat ions Sàrl and then from the latter to Skype lnves tm ents Sàrl will not increase th e CIT and MBT basis of Skype Communica tions Sà rl and Skype lnvestm ents Sàrl, respective ly, by virtu e of article 18 ITL. 3.
Net Wealth Tax
Th e IFTL will be considered as debt fo r Luxembourg net wealth tax purposes. For th e det ermi nation of th e unitary va lu e of Springboard lnvestments Sàrl, th e value of the IFTL will tax-wise proportionall y increase so as t o r eflect the return on the underl ying assets he ld by Springboard lnvestments Sàrl through Atomico LP. Your si ncer ely,
- -~~b~tî Emmanuel PARENT
Bart V AN DROOGEN,(l,t
Enc l os ures: Enclosur e 1: Enclosure Il:
Copy of the Second Amended and Restated Limited Pa rtnership Agr eement of Atomico Ventures Il, LP dated Decem ber 3, 2009. Copy of the ln t erest Free Tracking Loan Facility agreement entered into between Spri ngboard lnvestments Sàrl and Skype Ltd (lreland).
Di sel aimer Th is confirmation reques t was prepared by Ernst & Young Tax Advisory Services S.à r. I. for the sole benef it of Skype Technologies SA, Skype Communications Sàrl and Springboard lnvestments Sàrl (" our Clients"). This clearance request is based on the fact s as presented tous at the da te of this let ter. This clearance should not be relied upon by any other party for any other purpose wilhout the express wrilten au thoriza tion of Ernst & Young Tax Advisory Services S.à r.I. This cleara nce request was pr·epared with only our Clients' interests in mind and our work was not planned or carried oul in contemplation of any use whatsoever by any other party. Ernst & Young Tax Advisor y Services S.à r.I. and ils employees neither owe nor accept any duty of care or responsibility to any other party, wheth er in con tract or in to r t (includ ing without limitation, n eg ligence and breach of sta tutory dut y) or however arising, and sha ll no t be liabl e in respect of any loss, damag e or e xpense of whatever nat ure which is caused to the Clients or to any other part y as a result of the di st r ibut ion or a vailabil ity of the cleara nce .
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Appendix 1: Simplified structure 3 of the Group afte r t he acquisition of th e inves tment in Atomico LP.
S h a re h o lde rs
Skype G lobal Sàrl (Luxembourg)
1 Springboard Acq uisitions Sérl (Lu xembourg)
Royalty b earing llcense
Royalty free license Skype Technologies SA (Luxembou rg)
- - - -i, .
~
/~ Skype Limited ( lreland)
1
1
1
Skype Communication s Sàrl (Luxembourg)
Skype Software Sàrl (Luxembourg)
Subsidia ries
1 Spr ingboard
lnterest Free Tra cking Loan Facili ty (U SD 10 millio n)
lnvestm ents S.à r.I . (Luxembourg)
1 Atomico Ventures Il LP (Cayman Islands)
1
lnvestments
1
3 Please not e that thi s sirnpl ifi ed structure takes into account the rnerger of Skype Technologies SA into Skype Luxembourg
Holdings SA (newly Skype Technologies SA) which has been implernented with retroactive effect as of January 1, 2010.
Ernst & Younq Tax A dvisory Ser vices Sociét é à responsabil it é limit ée 7, rue Gabriel Lippmann Parc d'Ac t ivit é Syrdall 2 L·5365 Munsbach B.P. 7BO L·2017 Luxembourg Tel: +352 42 124 1 fax : + 352 42 124 5555 ww1·1.ey.com/luxembourg R.C.S. Luxembourg B 88 073 TVA LU 19236233 Capital soc ial : Eur 12.400
Please fi nd attac hed a PDF copy of the advance tax clearance obtained for our Clients Skype Tec hnologies SA, Skype Commun icat ions Sàrl and Spr ingboard lnvest ment s Sàr l. Th is clear ance shou ld not be relied upon by any other party for any other pur pose wit hout t he expr ess written auth orisati on of Ernst & You ng Tax Advisory Services S.à r.I. Luxembou rg. Ern st & Young Tax Ad vi sor y Services S.à r.I. and its employees neit her owe nor accept any duty of care or responsibi lit y to any oth er par ty, whether in contract or in tort (including wi thou t limi ta t ion, negligence and brea ch of stat utory duty) or however ari sing , and shall not be liable in respec t of any loss. damage or expense of w hatever natu re, which is ca used to the client or to any other part y as a r esult o f t he distr ibution or availability of the clearance .
gg ERNS T& YOUNG
A mcmbcr r1rm of Ernst & Young Global L1m1ted
lllllll lJlll lllllllllllllll'"'" i!/ ERNST & YOUNG
Ern st & Younq Tax Advi sor y Se rv ices Soc iét é à respon sabilit é li mi t ée 7, Parc d'Activité Syr dall L·5365 Mu nsbac h B.P. 780 L·2017 Luxembou rg Tel: +352 42 124 1 Fax: +352 42 124 5555 www.ey.com/luxembourg
Adm inistration des Contribut ions Dir ectes R.C.S. Luxembourg B 88 073 TVA LU 19236233 Bureau d'imposition Sociétés VI ...-------------1;.a~· al social: Eur: 12.400 Mr. Marius Kohl BUREAU D'IMPOSITION SOC. 6 18, rue du Fort Wedell ENTR EE L-29 82 Luxembourg
PY
Lux emb ourg, 11 Nove mber 20 10
Object : Name of th e operat ional group : Name of th e project : Releva nt Luxembourg compa nies bein g part of th e restru cturing :
Amount of the inves tment : Key words :
Skype At omico/ Joltid Skype Techn ologies SA Tax number : (2 003 2223 525) Skype Communica t ions Sàrl Tax number : (2005 2435 138) Springb oa r d ln ves tments Sà rl Tax number : (2009 2434 541 ) US D 10 millions Tax transpa rency lnt erest Free Trackin g Loan
Dear Mr. Kohl, The group Skyp e (her ea fter "th e Gro up") mandated us with th e tax co nsult ing in respect of a contemplated legal structur ing the mai n objectives and steps of wh ich will be described in chronolog ical ord er below . The present letter aims at depicting our analysis of the tax t reatment to be appli ed and wh ich wi ll be r eflected in t he tax ret urns of the group compa nies accordin gly.
A m1,;rrtE:r 'r
cf [ n t .s;. Your.g {
b
L
• d
___.,,,, 1111111 11111111 111111111111111•· ·· · ~ERNST & YOUNG
1.
Genera l co ntext
ln November 2009, Skype acquired from Joltid the intellec tual property righ ts to technology that fac il itates commun icati ons in the peer-to-peer network of Skype users. Skype acquired this t echnology as part of a settlement reached with Joltid in which ail ou t standing litiga tion between the parties was reso lved . An agreement was reached in connection with this settlement requ iri ng Skype to commit USD 10 million to A t omico LP. Atom ico LP aims to ach ieve superior returns from investments primarily in eq uity and equityre lated securities, principally in European-re lated t echno logy, med ia and telecommunication businesses. As of March 22, 2010, Atom ico LP had raised USD 165 milli on t o invest in early stage, high growth technology companies. We refer to the letter dated Februar y 8, 2010 regarding the tax treatment appl ica ble t o the acquisition of the Skype group by Silver Lake Partners and a conso rtium of investors as well as to our letter dated June 14, 2010 regarding the tax treatmen t of the restructuring of t he Skype Luxembourg entities. We also r efer to the discussions held during our meetin g of June 14, 2010 . Il .
Description of the acqui sit i on struct ure
Step 1:
On November 18, 2009, Springboard Acqu isitions Sàrl incorporated a new Luxe mbou rg private limited liabi lity company, Springboa rd lnvestments Sàrl, with a share capita l of USD 20,000.
Step 2:
On December 30, 2009 , t he shares in Springboard lnvestmen ts Sà rl have been contributed down the cha in to Skype Commun ica tions Sàrl in exchange for sha res .
St ep 3:
On April 1, 20 10, Skype Ltd ( lreland) granted an int eres t free tracking loan faci lity (hereafter "IFTL") to Sp ringboard lnvestm ents Sàrl for an amount of USD 10 mill ion in order for th e latter to fund the investm ent in Atom ico LP. At th e leve l o f Skype Ltd (lreland), the funding has been made by draw ing down an existing intercompany balance w ith Skyp e Techno logies S.A. (i. e. a payable owed by Skype Technolog ies SA to Skype Ltd (lreland)).
Step 4:
On Apri l 2, 20 10, Springboard lnvest ment Sàrl drew down an USD amou nt equivalent to EUR 1,093 ,833.55 under the IFTL agreement in order to fund its investment in Atomico LP.
Please find in Append ix 1th e simplified struc ture of th e Group after t he acqu isition of the investment in A tom ico LP.
2/5
llllllllllJlllllllllllllll'" ""
Ë!f ERNST & YOUNG
Ill.
Tax trea tm ent
1.
Characterizatio n of Atomico LP from a Lu xemb ourg t ax perspect ive
According t o t he Parliamentary work in relation to article 114 of t he draft Law 571-4, the qua lificat ion of a foreign entity as opaque or transparent, for Luxembourg tax purpos es, should be determined based on the compar ison between th e legal charac ter isti cs of the foreign entity and t he ones of sim il ar legal fo r ms existing und er Luxembourg law. According to the Limit ed Partnership Agreement1, Atomico LP has the foll ow ing main legal featu res: •
Capita l accounts: Th ere shall be established on t he books of Atomico LP a capita l account for each Pa r t ner that shal l be (a) increased by any cap ital contributions made t o A tomico LP by such Partner and any amounts in th e nature of incarne or ga in added to the capital accou nt of such Partner and (b) decreased by any distributions made to such Partn er and any amount in the nature of loss or expense subtracted from the capital accoun t of such Partner.
•
Distribu t ions: Distributions shall be made t o Partn ers in proportion to their r espective contributions .
•
Transfer abi litY- of interest: The General Partner shall not assign , mo rtgage, hypothecate , give, -sell or otherwise dispose of or encumb er ail or any part of its interes t as Gen eral Partner in Atomico LP except (a) in con necti on w ith th e change or rest ructu ri ng of th e form of legal en tity of the General Pa rtn er or (b) with the consent of 66-2/3% in int er est of Atomico LP investors. ln addition, the transfer of a Limited Pa rtner' s int er est in Atom ico LP shall only be made if th e transferor, the tran sf eree(s) and the General Partner agree in writin g and shall be lim ited to the cases explic itly for eseen in t he Limited Partnership Agr eement.
•
Management and co ntrai: The management, policies and con tra i of Atomico LP sha ll be vested exclusi vely in th e General Partn er.
•
Term of Part ners hi p: The t erm of Atom ico LP shall co ntinue un til th e 1 oth anniversary of th e da t e th at is 12 months after the dat e at whi ch the init ial cap ital contr ibut ions of the Partners sha ll be du e, unless Atomico LP is sooner wound up or dissolved as provided in arti cle 9 .2 ( i.e. dissolu tion upon an event of with drawal of th e Genera l Pa rtn er , listed in th e Ex empt ed Limi ted Partnership Law of the Ca yman Islands) or 9 .3 ( i.e., main ly, with the consent of a quali fying majority of Partn ers) or by operation of law.
Based o n th e above, the legal characteristics of Atomico LP are largely similar to th ose of a Luxemb our g li mited partn ershi p. Therefo re, Atomico LP is to be co nsidered as a tax transparent ent it y from a Luxembourg direc t tax perspective .
1
Please find in Enclosure 1 a copy o f the Second Amended and Restated Limited Par tne rship Agreement of Atomico Ventures Il, L P dated Decem ber 3, 2009.
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i!/ ERNST & YOUNG
As a result of the t ax transparency of A t omico LP, the shares / interest held by the la tt er wi ll, fro m a Luxembourg tax perspective, be considered as directly held by Spri ngboa r d lnvestments Sà rl and t hus, any income in connection with these shares / interest will be considered as directly de rived by Springboard lnvest ments Sàrl according toit s pro fi ts entitlemen ts as set ou t in the Limited Partnership Agreement. for Lu xembourg tax purposes. 2.
Tax treatment of the IFTL granted by Skype Ltd ( lreland) to Springboard lnvestments Sà rl
The IFTL 2 granted by Skype Ltd (l reland) to Springboard lnvestme nts Sàrl has the fo ll ow ing c haracte ri stics : • •
• • • • •
•
Th e IFTL has a long -term maturity (i.e. 30 years) and a fixed repayment dat e (i. e. Ap ril 1, 2040). The reim bursement of the advances under t he IFTL shall be limite d recou rse (a nd any claim by Sky pe Ltd (l reland) sha ll be limi ted) t o t he inves tm ent s in Atomico LP and any amounts rece ived by (and availab le t o) Springboa rd lnvestme nts Sàrl und er its investments in Atomico LP. None of the adva nces unde r the IFTL shall bear any inter est. Th e IFTL is denomina te d in USD. The proceeds of each advance under th e IFTL facil ity shall be applied t owards fu nding inves tments of Spring board lnvestments Sàrl in Atomico LP. The IFT L may be fully or parti ally prepaid by Springboard lnvestments Sà rl upon prior notice to Skyp e Ltd ( lr eland). Skype Ltd Clreland) may req uire r epayment upon 5 business day notice in case of the imminent loss of Springboard lnvestm ents Sàrl's pos it ion as a direct or ind irect wholly own ed subsidiary o f Skype Global Sà rl. No subo rdination clause is fo resee n.
The IFTL w ill be treated as debt from a Luxembo urg acco unting and lega l perspectiv e. As a consequ ence, acco rdin g t o art icle 40 of th e Lu xembourg Inca rne Tax Law (herea fter " ITL") and paragraph §62(1) of the valuation law (BewG), the IFTL wi ll be treated as a debt of Springboard lnvestment s Sà rl towards Skype Ltd (lrel and) for Lu xembourg tax pur poses. A loa n that does not bear interest. such as th e IFTL, does no t comp ly w ith the ar m's length principle. Th er ef ore, a nati onal int er es t expense wil l be imput ed on t he IFTL , at the level of Spri ngboa rd lnvest ments Sà rl. This nationa l interest will be equal t o 100% of the net incarne derived from the shares / int eres t held by Spring boa r d lnvestm ents Sà rl through A t omico LP (inc lu ding but not limited to dividends, ca pital gain s, li quid ation proceeds or f oreig n exchange gain s) less a gross marg in of Y4 %. Thi s national interest expense on th e IFTL will be deductible from th e taxable basis of Springboa r d lnvestme nts Sàrl and wil l not be subjec t to withh oldi ng tax in Luxembourg.
2
Please find in Enc losure Il a copy of the lnteres t Free Trac king Loan Fac ili ty ag reement ente red into between Springboard lnvestmen ts Sàrl and Skype Ltd (lreland).
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â!/ ERNST & YOUNG
The deemed interest paid by Springboard ln vestments Sàrl will be considered as generating an income at the level of Skype Ltd. At the time Sprin gboard lnvestments Sàrl w ill distribute dividend toits shareholder (i .e. Skype Communications Sàrl), the deemed interest income will be considered as distributed by Skype Ltd toits so le shareholder (i.e. Skyp e Tec hnologies SA) and then contri buted fr om the la t ter to Skype Communications Sàrl and then from the latter t o Springboard lnvest ments Sàrl by way of an informai capital contribution . Th e hidden dividend distribu tion fro m Skype Ltd ( lrelan d) to Skype Techno logies SA will be exempt fro m Luxembourg corporate income tax (herea ft er "CIT") and municipal business tax (hereaft er " MBT") according to the provisions of article 166 (2) ( 1) ITL. ln addition, the hidden capital con tribution from Skype Tech nologies SA to Skype Communicat ions Sàrl and then from the latter to Skype lnves tm ents Sàrl will not increase th e CIT and MBT basis of Skype Communica tions Sà rl and Skype lnvestm ents Sàrl, respective ly, by virtu e of article 18 ITL. 3.
Net Wealth Tax
Th e IFTL will be considered as debt fo r Luxembourg net wealth tax purposes. For th e det ermi nation of th e unitary va lu e of Springboard lnvestments Sàrl, th e value of the IFTL will tax-wise proportionall y increase so as t o r eflect the return on the underl ying assets he ld by Springboard lnvestments Sàrl through Atomico LP. Your si ncer ely,
- -~~b~tî Emmanuel PARENT
Bart V AN DROOGEN,(l,t
Enc l os ures: Enclosur e 1: Enclosure Il:
Copy of the Second Amended and Restated Limited Pa rtnership Agr eement of Atomico Ventures Il, LP dated Decem ber 3, 2009. Copy of the ln t erest Free Tracking Loan Facility agreement entered into between Spri ngboard lnvestments Sàrl and Skype Ltd (lreland).
Di sel aimer Th is confirmation reques t was prepared by Ernst & Young Tax Advisory Services S.à r. I. for the sole benef it of Skype Technologies SA, Skype Communications Sàrl and Springboard lnvestments Sàrl (" our Clients"). This clearance request is based on the fact s as presented tous at the da te of this let ter. This clearance should not be relied upon by any other party for any other purpose wilhout the express wrilten au thoriza tion of Ernst & Young Tax Advisory Services S.à r.I. This cleara nce request was pr·epared with only our Clients' interests in mind and our work was not planned or carried oul in contemplation of any use whatsoever by any other party. Ernst & Young Tax Advisor y Services S.à r.I. and ils employees neither owe nor accept any duty of care or responsibility to any other party, wheth er in con tract or in to r t (includ ing without limitation, n eg ligence and breach of sta tutory dut y) or however arising, and sha ll no t be liabl e in respect of any loss, damag e or e xpense of whatever nat ure which is caused to the Clients or to any other part y as a result of the di st r ibut ion or a vailabil ity of the cleara nce .
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Appendix 1: Simplified structure 3 of the Group afte r t he acquisition of th e inves tment in Atomico LP.
S h a re h o lde rs
Skype G lobal Sàrl (Luxembourg)
1 Springboard Acq uisitions Sérl (Lu xembourg)
Royalty b earing llcense
Royalty free license Skype Technologies SA (Luxembou rg)
- - - -i, .
~
/~ Skype Limited ( lreland)
1
1
1
Skype Communication s Sàrl (Luxembourg)
Skype Software Sàrl (Luxembourg)
Subsidia ries
1 Spr ingboard
lnterest Free Tra cking Loan Facili ty (U SD 10 millio n)
lnvestm ents S.à r.I . (Luxembourg)
1 Atomico Ventures Il LP (Cayman Islands)
1
lnvestments
1
3 Please not e that thi s sirnpl ifi ed structure takes into account the rnerger of Skype Technologies SA into Skype Luxembourg
Holdings SA (newly Skype Technologies SA) which has been implernented with retroactive effect as of January 1, 2010.
