Vodafone 2004 Annual Report Download - page 136

Vodafone Group Plc Annual Report 2004
134
Additional Shareholder Information continued
corporations. Dividends will be income from sources outside the United States and will
generally be “passive income”or “financial services income”, which is treated
separately from other types of income for the purposes of computing any allowable
foreign tax credit.
In the case of shares, the amount of the dividend distribution to be included in income
will be the US dollar value of the pound sterling payments made, determined at the
spot pound sterling/US dollar rate on the date of the dividend distribution, regardless
of whether the payment is in fact converted into US dollars. Generally, any gain or loss
resulting from currency exchange fluctuations during the period from the date the
dividend payment is to be included in income to the date the payment is converted
into US dollars will be treated as ordinary income or loss. Generally, the gain or loss
will be income or loss from sources within the United States for foreign tax credit
limitation purposes.
Taxation of capital gains
UK taxation
A US holder may be liable for both UK and US tax in respect of a gain on the disposal
of the Company’s shares or ADSs if the US holder is:
(i) a citizen of the United States resident or ordinarily resident for UK tax
purposes in the United Kingdom,
(ii) a US domestic corporation resident in the United Kingdom by reason of being
centrally managed and controlled in the United Kingdom, or
(iii) a citizen of the United States or a corporation that carries on a trade,
profession or vocation in the United Kingdom through a branch or agency or,
in respect of companies for accounting periods beginning on or after
1 January 2003, through a permanent establishment and that has used the
shares or ADSs for the purposes of such trade, profession or vocation or has
used, held or acquired the shares or ADSs for the purposes of such branch or
agency or permanent establishment.
However, subject to applicable limitations and eligibility to the provisions of the Old
Treaty, such persons may be entitled to a tax credit against their US federal income
tax liability for the amount of UK capital gains tax or UK corporation tax on chargeable
gains (as the case may be) which is paid in respect of such gain.
Under the New Treaty, capital gains on dispositions of the shares or ADSs are
generally subject to tax only in the country of residence of the relevant holder as
determined under both the laws of the United Kingdom and the United States and as
required by the terms of the New Treaty. However, individuals who are residents of
either the United Kingdom or the United States and who have been residents of the
other jurisdiction (the US or the UK, as the case may be) at any time during the six
years immediately preceding the relevant disposal of shares or ADSs may be subject
to tax with respect to capital gains arising from the dispositions of the shares or ADSs
not only in the country of which the holder is resident at the time of the disposition,
but also in that other country.
US federal income taxation
A US holder that sells or otherwise disposes of the Company’s shares or ADSs will
recognise a capital gain or loss for US federal income tax purposes equal to the
difference between the US dollar value of the amount realised and the holder’s tax
basis, determined in US dollars, in the shares or ADSs. Generally, a capital gain of a
non-corporate US holder that is recognised on or after 6 May 2003 and before
1 January 2009 is taxed at a maximum rate of 15%, provided the holder has a
holding period of more than one year (previously the maximum rate was 20%). The
gain or loss will generally be income or loss from sources within the United States for
foreign tax credit limitation purposes. The deductibility of losses is subject to
limitations.
Additional tax considerations
UK inheritance tax
An individual who is domiciled in the United States (for the purposes of the Estate Tax
Convention) and is not a UK national will not be subject to UK inheritance tax in
respect of the Company’s shares or ADSs on the individual’s death or on a transfer of
the shares or ADSs during the individual’s lifetime, provided that any applicable US
federal gift or estate tax is paid, unless the shares or ADSs are part of the business
property of a UK permanent establishment or pertain to a UK fixed base used for the
performance of independent personal services. Where the shares or ADSs have been
placed in trust by a settlor, they may be subject to UK inheritance tax unless, when the
trust was created, the settlor was domiciled in the United States and was not a UK
national. Where the shares or ADSs are subject to both UK inheritance tax and to US
federal gift or estate tax, the Estate and Gift Tax Convention generally provides a credit
against US federal tax liabilities for UK inheritance tax paid.
UK stamp duty and stamp duty reserve tax
Stamp duty will, subject to certain exceptions, be payable on any instrument
transferring shares in the Company to the Custodian of the Depositary at the rate of
1.5% on the amount or value of the consideration if on sale or on the value of such
shares if not on sale. Stamp duty reserve tax (SDRT), at the rate of 1.5% of the price
or value of the shares, could also be payable in these circumstances, and on issue to
such a person, but no SDRT will be payable if stamp duty equal to such SDRT liability
is paid. In accordance with the terms of the Deposit Agreement, any tax or duty
payable on deposits of shares by the Depositary or the Custodian of the Depositary
will be charged to the party to whom ADSs are delivered against such deposits.
No stamp duty will be payable on any transfer of ADSs of the Company, provided that
the ADSs and any separate instrument of transfer are executed and retained at all
times outside the United Kingdom.
A transfer of shares in the Company in registered form will attract ad valorem stamp
duty generally at the rate of 0.5% of the purchase price of the shares. There is no
charge to ad valorem stamp duty on gifts. On a transfer from nominee to beneficial
owner (the nominee having at all times held the shares on behalf of the transferee)
under which no beneficial interest passes and which is neither a sale nor in
contemplation of a sale, a fixed £5.00 stamp duty will be payable.
SDRT is generally payable on an unconditional agreement to transfer shares in the
Company in registered form at 0.5% of the amount or value of the consideration for
the transfer, but is repayable if, within six years of the date of the agreement, an
instrument transferring the shares is executed or, if the SDRT has not been paid, the
liability to pay the tax (but not necessarily interest and penalties) would be cancelled.
However, an agreement to transfer the ADSs of the Company will not give rise to
SDRT.