Vodafone 2006 Annual Report Download - page 147

Vodafone Group Plc Annual Report 2006 145
Dividends must be included in income when the US holder, in the case of shares, or the
Depositary, in the case of ADSs, actually or constructively receives the dividend and will
not be eligible for the dividends-received deduction generally allowed to US
corporations in respect of dividends received from other US corporations. Dividends will
be income from sources outside the United States. Dividends paid in taxable years
beginning before 1 January 2007 generally will be “passive” or “financial services”
income, and dividends paid in taxable years beginning after 31 December 2006
generally will be “passive” or “general” income, which in either case 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 citizen of the United States who has been resident or ordinarily resident for UK tax
purposes in the United Kingdom, ceased to be so resident or ordinarily resident for a
period of less than 5 years of assessment and who disposed of the shares or ADSs
during that period (a “Temporary Non-Resident”), unless the shares or ADSs were
also acquired during that period, such liability arising on that individual’s return to
the UK;
(iii) a US domestic corporation resident in the United Kingdom by reason of being
centrally managed and controlled in the United Kingdom; or
(iv) 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, 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.
Under the 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 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 a resident at the time of the disposition but also in that other country
(although, in respect of UK taxation, generally only to the extent that such an individual
comprises a Temporary Non-Resident).
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 before 1 January 2009 is taxed at a maximum
rate of 15%, provided the holder has a holding period of more than one year. 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 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.
Shareholder information