Unilever 2002 Annual Report Download - page 149

Unilever Annual Report & Accounts and Form 20-F 2002
146 Taxation for US residents
United Kingdom
Taxation on dividends
Under United Kingdom law income tax is not withheld from
dividends paid by United Kingdom companies. Shareholders,
whether resident in the United Kingdom or not, receive the
full amount of the dividend actually declared.
If you are a shareholder resident in the United Kingdom
you are entitled to a tax credit against your liability for
United Kingdom income tax, equal to 10% of the aggregate
amount of the dividend plus tax credit (or one-ninth of the
dividend). For example, a dividend payment of £9.00 will
carry a tax credit of £1.00.
If you are a shareholder resident in the US, the dividend
actually declared is taxable in the US as ordinary income and
is not eligible for the dividends received deduction allowable
to corporations. The dividend is foreign source income for
US foreign tax credit purposes.
In addition, under the current income tax Convention
between the US and the UK (the ‘Convention’), a US
shareholder eligible for the benefits of the Convention
may elect to be treated for US tax purposes only as having
received an additional taxable dividend. The additional
deemed dividend is equal to one-ninth of the actual cash
dividend received (an additional dividend of £1 in the above
example). The shareholder will be eligible to claim a US
foreign tax credit in the amount of the additional deemed
dividend. The tax credit may, subject to certain limitations
and restrictions, reduce the shareholder’s US Federal income
tax liability. The procedure for making this election is
described in IRS Revenue Procedure 2000-13.
On 24 July 2001, the US and the UK signed a new income
tax Convention (the ‘New Convention’). Under the New
Convention, US shareholders would not be entitled to
make the election described in the preceding paragraph.
These provisions of the New Convention will apply to US
shareholders beginning on the first day of the second month
following the date on which the New Convention is ratified
by the US and the UK.
However, US shareholders may elect to remain subject to
all the provisions of the current Convention for a period of
12 months after the date on which the New Convention
would otherwise be applicable. It is uncertain when the
New Convention will be ratified.
Taxation on capital gains
Under United Kingdom law, when you sell shares you may
be liable to pay capital gains tax. However, if you are either:
•an individual who is neither resident nor ordinarily
resident in the United Kingdom; or
•a company which is not resident in the United Kingdom;
you will not be liable to United Kingdom tax on any capital
gains made on disposal of your shares.
The exception is if the shares are held in connection with
atrade or business which is conducted in the United
Kingdom through a branch or an agency.
Inheritance tax
Under the current estate and gift tax convention between
the United States and the United Kingdom, ordinary shares
held by an individual shareholder who is:
•domiciled for the purposes of the convention in the
United States; and
•is not for the purposes of the convention a national of
the United Kingdom;
will not be subject to United Kingdom inheritance tax on:
•the individual’s death; or
•on a gift of the shares during the individual’s lifetime.
The exception is if the shares are part of the business
property of a permanent establishment of the individual
in the United Kingdom or, in the case of a shareholder who
performs independent personal services, pertain to a fixed
base situated in the United Kingdom.