Sohu.com (SOHU)

ITEM 1A. RISK FACTORS

The new PRC Corporate Income Tax Law, which unifies the statutory income tax rate of enterprises in China to 25% became effective on January 1, 2008. The new law also provides that “software enterprises” can enjoy an income tax exemption for two years beginning with their first profitable year and a 50% tax reduction to a rate of 12.5% for the subsequent three years. During the three months ended June 30, 2008, some of our operating entities in China qualified as software enterprises. We were informed by the relevant tax bureau that those entities are subject to 0% income tax rate for full year 2008, and 12.5% for 2009 through 2011. Similar to any other tax preferential treatments which are subject to the interpretations by different levels of tax authorities, we cannot assure you that the software enterprises qualifications of those operating entities will not be challenged by higher level tax authorities and be repealed, or that there will not be any future implementation rules that are inconsistent with current interpretation of the Corporate Income Tax Law. If those operating entities cannot qualify for such income tax holidays, our effective income tax rate will be increased significantly and we may have to pay additional income tax to make up the previously unpaid tax, which could materially and adversely affect our results of operations.

There are no other material changes or updates to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 28, 2008 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the three months ended March 31, 2008 filed with the SEC on May 9, 2008.

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Table of Contents

ITEM 1A. RISK FACTORS

While we have control procedures in place that are designed to prevent the infringement by us of the intellectual property right of others, we cannot be certain that our products, services and intellectual property used in our normal course of business do not or will not infringe patents, copyrights or other intellectual property rights held by third parties. We have in

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the past been, are currently, and may in the future be, subject to claims and legal proceedings relating to the intellectual property of others in the ordinary course of our business. In particular, if we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, may be required to pay damages and may incur licensing fees or be forced to develop alternatives. We may incur substantial expenses in defending against third party infringement claims, regardless of their merit. Successful infringement claims against us may result in substantial monetary liability or may disrupt the conduct of our business by restricting or prohibiting our use of the intellectual property in question. For example, during 2006 five United States movie companies commenced a lawsuit against us in the PRC alleging that a movie download service we had been providing infringed their copyrights in the movies. In December 2006, the court decided the case against us, and ordered us to pay damages of approximately $138,000 to the U.S. movie companies. In addition, in 2007 a writer brought a lawsuit against in China claiming that we violated his copyright to 190 SMS messages in 2007. The Chinese court decided the case against us, and we paid damages of approximately $13,000 to the writer. In addition, we have provided search engine facilities capable of locating and accessing links to download MP3 music, movies, images and other multimedia files and/or other content hosted on third party Websites, which may be protected by copyright law. In March 2008 four music record companies commenced lawsuits against us in the PRC alleging that we have provided music search links and download services for songs in which they own copyrights, and that the provision of these links and services violated their copyrights. We cannot predict the outcome or resolution of these claims, and cannot determine at this point to what extent the plaintiffs’ allegations are meritorious either factually or legally, nor can we predict whether the plaintiffs will be successful in these lawsuits. It is possible that these lawsuits could conclude with judgments against us, or settlements prior to final judgment, that would require us to pay damages or royalties to the plaintiffs.

There are no other material changes or updates to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 28, 2008.

ITEM 1A. RISK FACTORS

Under existing tax laws, dividends distributed by a foreign invested enterprise to its investors outside the PRC are exempted from withholding tax. It is reported that the PRC government intends to levy withholding tax upon such dividends beginning January 1, 2008. Should the PRC government proceed to enact legislation imposing such a withholding tax, our China-based subsidiaries, Sohu Era, Sohu Media, Sogou Technology and AmazGame, may be subject to withholding tax in the event that they distribute dividends to our non-PRC holding companies. There are no other material changes or updates to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 8, 2007 and in Part I, Item 2 of our Quarterly Report on Form 10-Q for the three months ended June 30, 2007 filed with the SEC on August 6, 2007.