Reduced Taxation under the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA)

Under the JGTRRA of 2003, the maximum rate of United States federal income tax on qualified dividend income received by an individual (and certain trusts and estates) is 15%. This maximum rate applies to eligible dividends received after December 31, 2002 and before January 1, 2011.

Qualified dividend income includes most, but not all, dividends received by an individual from U.S. domestic corporations and qualified foreign corporations. A foreign corporation is a qualified foreign corporation if:

1. it is eligible for benefits of a comprehensive income tax treaty with the U.S. which includes an exchange of information program, or

2. the stock of such foreign corporation on which the dividend is paid is readily tradable on an established securities market in the U.S.

For individual shareholders subject to U.S. federal income taxation on the 2007 dividend paid on April 5, 2007, to shareholders of record on April 4, 2007, is considered a qualified foreign corporation under either condition above and as such the dividend is eligible for the reduced rate under the JGTRRA.

In addition, to qualify for the reduced rate, the share of stock on which the dividend is paid must be held more than 60 days in the 121-day period beginning 60 days before the ex-dividend date and the stockholder must not be under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.

Even though a shareholder receives a dividend from the company that may qualify for the reduced tax rate, shareholders are required to determine whether they meet the necessary holding period requirements with respect to the shares. If necessary, the shareholder should seek professional tax advice to make this determination.

Yes, Daimler is regarded as a qualified foreign corporation and consequently the reduced rate for dividends under the JGTRRA will be applicable to the Daimler dividend subject to the holding period limitations discussed above.

Under German law, German companies are subject to a 21.1% withholding tax by the German government. U.S. shareholders may be refunded up to 6.1% of the withholding tax from the German government, and claim a foreign tax credit or itemized deduction on their U.S. federal Income Tax return for the non-refundable 15% remainder.

The non-refundable 15% withholding tax can be claimed as a foreign tax credit on the Federal Income Tax return. Consequently by application of the reduced rate of 15% under the JGTRRA, in case the foreign tax credit will be available to the taxpayer, no additional U.S. federal income tax is imposed on the dividend.

Example

	1 Share	1000 Shares
Dividend per share	1.00 USD	1000.00 USD
Less withholding tax 21.1%	- 0.211 USD	- 211.00 USD
Refundable amount 6.1%	0.061 USD	61.00 USD
Net Payment	0.85 USD	850.00 USD
Taxable dividend amount	1.00 USD	1000.00 USD
Tax on eligible dividend of with reduced rate of 15%	- 0.15 USD	- 150.00 USD
Foreign tax credit	0.15 USD	150.00 USD
Net payment after taxes	0.85 USD	850 USD

Special rules for determining an individual’s foreign tax credit limitation shall apply in the case of qualified dividend income. Rules similar to those of Internal Revenue Code section 904(b)(2)(B) concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential shall also apply to any qualified dividend income.

German company dividends paid to qualified U.S. pension funds are now exempt from German withholding tax under the Germany-U.S. Income Tax Treaty (the “Treaty”). The applicable plan sponsor or trustee should seek professional tax advice to make the determination, if the U.S. pension fund would qualify for the tax exemption under the new Treaty and request the refund of the 21.1% German withholding tax. As a result, U.S. shareholders with Daimler stock held in a qualified U.S. pension fund should automatically receive a credit to their account for the refund of the 21.1% German withholding tax.

The above information is not exhaustive and does not take a large number of individual cases into account. In such cases the stockholder should seek professional advice.

Form 1099-DIV for 2007 reports the gross amount of dividends in Box 1b (Qualified dividends) which should be included on Form 1040, Line 9b.

Generally, if you paid or accrued foreign taxes to a foreign country and are subject to U.S. tax on the same income, you may take either a credit or an itemized deduction for those non-refundable foreign taxes. Under German law, German corporations are required to withhold 21.1% tax on dividends. Qualified U.S. shareholders (subject to certain limitations) can obtain a partial refund of 6.1% of this tax as outlined in the previous section. The remaining non-refundable 15% of the foreign tax paid can be claimed as either an itemized deduction on Schedule A of Form 1040 or a foreign tax credit. Individuals who hold Daimler stock in a U.S. pension fund are not eligible to claim the non-refundable 15% tax as either a credit or itemized deduction. However, as discussed above, German company dividends paid to qualified U.S. pension funds are now exempt from German withholding tax under the Treaty and U.S. shareholders with Daimler stock held in a qualified U.S. pension fund should automatically receive a refund of the 21.1% German withholding in their account. The applicable plan sponsor or trustee should seek professional tax advice to make the determination, if the U.S. pension fund would qualify for the tax exemption under the new Treaty.

There are two methods for calculating and reporting the foreign tax credit on Form 1040.

A taxpayer can complete Form 1116 to determine the amount of foreign tax credit allowed to be claimed on Form 1040. Alternatively, under a more simplified method, a taxpayer with not more than $300 ($600 if married filing jointly) of foreign taxes withheld may be able to claim the foreign tax credit without filing Form 1116. Form 1116 and the related instructions can be obtained on the Internet at www.irs.ustreas.gov/formspubs/index.html

Special rules for determining an individual’s foreign tax credit limitation apply in the case of qualified dividend income. Rules similar to those of Internal Revenue Code section 904(b)(2)(B) concerning adjustments to the foreign tax credit limitation to reflect any capital gain rate differential also apply to any qualified dividend income.

The above information is not exhaustive and does not take a large number of individual cases into account. In such cases the stockholder should seek professional advice. The information should not be construed as the rendering of tax advice and you may want to consult a professional tax advisor on your particular situation.