Vodafone 2009 Annual Report Download - page 135

Vodafone Group Plc Annual Report 2009 133
Additional information
(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 (although, in respect of UK taxation, generally only to the extent that
such an individual comprises a temporary non-resident).
US federal income taxation
Subject to the PFIC rules described below, 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 in tax
years beginning before 1 January 2011 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.
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.
PFIC rules
The Company does not believe that the shares or ADSs will be treated as stock of a
passive foreign investment company, or PFIC, for US federal income tax purposes.
This conclusion is a factual determination that is made annually and thus is subject
to change. If the Company is treated as a PFIC, any gain realised on the sale or other
disposition of the shares or ADSs would in general not be treated as capital gain,
unless a US holder elects to be taxed annually on a mark-to-market basis with respect
to the shares or ADSs. Otherwise a US holder would be treated as if he or she has
realised such gain and certain “excess distributions” rateably over the holding period
for the shares or ADSs and would be taxed at the highest tax rate in effect for each
such year to which the gain was allocated. An interest charge in respect of the tax
attributable to each such year would also apply. Dividends received from Vodafone
would not be eligible for the preferential tax rate applicable to qualified dividend
income for certain non-corporate holders.