HSBC 2011 Annual Report Download - page 422

HSBC HOLDINGS PLC
Shareholder Information (continued)
Taxation of shares and dividends > US residents
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stamp duty reserve tax at the rate of 0.5% of the
consideration. In CREST transactions, the tax
is calculated and payment made automatically.
Deposits of shares into CREST generally will not be
subject to stamp duty reserve tax, unless the transfer
into CREST is itself for consideration. Following the
case HSBC pursued before the European Court of
Justice (Case C-569/07 HSBC Holdings plc and
Vidacos Nominees v The Commissioners for HM
Revenue & Customs) HMRC now accepts that the
charge to stamp duty reserve tax at 1.5% on the issue
of shares to a depositary receipt issuer or a clearance
service located within the European Union is
prohibited.
Taxation – US residents
The following is a summary, under current law, of
the principal UK tax and US federal income tax
considerations that are likely to be material to the
ownership and disposition of shares or ADSs by a
holder that is a resident of the US for US federal
income tax purposes (a ‘US holder’) and who is not
resident or ordinarily resident in the UK for UK tax
purposes. The summary does not purport to be a
comprehensive description of all of the tax
considerations that may be relevant to a holder of
shares or ADSs. In particular, the summary deals
only with US holders that hold shares or ADSs as
capital assets, and does not address the tax treatment
of holders that are subject to special tax rules, such
as banks, tax-exempt entities, insurance companies,
dealers in securities or currencies, persons that hold
shares or ADSs as part of an integrated investment
(including a ‘straddle’) comprised of a share or ADS
and one or more other positions, and persons that
own, directly or indirectly, 10% or more of the
voting stock of HSBC Holdings. This discussion is
based on laws, treaties, judicial decisions and
regulatory interpretations in effect on the date
hereof, all of which are subject to change. Under the
current income tax treaty between the UK and the
US, US holders are no longer entitled to claim a
special foreign tax credit in respect of dividends.
Holders and prospective purchasers should
consult their own advisers regarding the tax
consequences of an investment in shares or ADSs
in light of their particular circumstances, including
the effect of any national, state or local laws.
Any US federal tax advice included in this
Annual Report is for informational purposes only;
it was not intended or written to be used, and cannot
be used, for the purpose of avoiding US federal tax
penalties.
Taxation of dividends
Currently no tax is withheld from dividends paid by
HSBC Holdings. A US holder must include cash
dividends paid on the shares or ADSs in ordinary
income on the date that such holder or the ADS
depositary receives them, translating dividends paid
in UK pounds sterling into US dollars using the
exchange rate in effect on the date of receipt. A US
holder that elects to receive shares in lieu of a cash
dividend must include in ordinary income the fair
market value of such shares on the dividend payment
date, and the tax basis of those shares will equal such
fair market value.
Subject to certain exceptions for positions that
are held for less than 61 days or are hedged, and
subject to a foreign corporation being considered a
‘qualified foreign corporation’ (which includes not
being classified for US federal income tax purposes
as a passive foreign investment company), certain
dividends (‘qualified dividends’) received by an
individual US holder before 2013 generally will be
subject to US taxation at a maximum rate of 15%.
Based on the company’s audited financial statements
and relevant market and shareholder data, HSBC
Holdings does not anticipate being classified as a
passive foreign investment company. Accordingly,
dividends paid on the shares or ADSs generally
should be treated as qualified dividends.
Taxation of capital gains
Gains realised by a US holder on the sale or other
disposition of shares or ADSs normally will not be
subject to UK taxation unless at the time of the sale
or other disposition the holder carries on a trade,
profession or vocation in the UK through a branch or
agency or permanent establishment and the shares or
ADSs are or have been used, held or acquired for the
purposes of such trade, profession, vocation, branch
or agency or permanent establishment. Such gains
will be included in income for US tax purposes, and
will be long-term capital gains if the shares or ADSs
were held for more than one year. A long-term
capital gain realised by an individual holder before
2013 generally will be subject to US tax at a
maximum rate of 15%.
Inheritance tax
Shares or ADSs held by an individual whose
domicile is determined to be the US for the purposes
of the United States-United Kingdom Double
Taxation Convention relating to estate and gift taxes
(the ‘Estate Tax Treaty’) and who is not for such
purposes a national of the UK will not, provided any
US Federal estate or gift tax chargeable has been