Vodafone 2013 Annual Report Download - page 174

Taxation of dividends
UK taxation
Under current UK tax law no withholding tax will be deducted from
thedividends we pay. Shareholders who are within the charge
to UK corporation tax will be subject to corporation tax on the dividends
we pay unless the dividends fall within an exempt class and certain
other conditions are met. It is expected that the dividends we pay would
generally be exempt.
A shareholder in the Company who is an individual resident for UK tax
purposes in the UK is entitled, in calculating their liability to UK income
tax, to a tax credit on cash dividends we pay on our shares or ADSs and
the tax credit is equal to one-ninth of the cash dividend.
US federal income taxation
Subject to the PFIC rules described below, a US holder is subject
to US federal income taxation on the gross amount of any dividend
we pay outof our current or accumulated earnings and prots
(as determined for US federal income tax purposes). Dividends paid
to a non-corporate US holder that constitute qualied dividend income
will be taxable to the holder at the special reduced rate normally
applicable to long-term capital gains provided that the ordinary shares
or ADSs are held for more than 60 days during the 121 day period
beginning 60 days beforethe ex-dividend date and the holder meets
other holding period requirements. Dividends paid by us with respect
to the shares or ADSs will generally be qualied dividend income.
A US holder is not subject toa UK withholding tax. The US holder
includes in gross income for US federal income tax purposes only
the amount of the dividend actually received from us and the receipt
of a dividend does not entitle the USholder to a foreign tax credit.
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 US. For the purpose of the
foreign tax credit limitation, foreign source income is classied in one
or two baskets and the credit for foreign taxes on income in any basket
is limited to US federal income tax allocable to that income. Generally
the dividends we pay will constitute foreign source income in the
passive income basket.
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 uctuations 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 US 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 our shares or ADSs if the US holder is:
a a citizen of the US resident for UK tax purposes in the UK;
a a citizen of the US who has been resident for UK tax purposes in the
UK, ceased to be so resident for a period of ve years or less 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;
a a US domestic corporation resident in the UK by reason of being
centrally managed and controlled in the UK; or
a a citizen of the US or a US domestic corporation that carries
on a trade, profession or vocation in the UK through a branch
or agency or, in the case of US domestic 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 UK and the
US and as required by the terms of the treaty. However, individuals who
are residents of either the UK or the US 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 (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 passive foreign investment company (‘PFIC’) rules
described below, a US holder that sells or otherwise disposes of our
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 is taxed at a maximum rate of 15% provided the holder has
a holding period of more than one year and does not have taxable
income in excess of certain thresholds. The gain or loss will generally
be income or loss from sources within the US for foreign tax credit
limitation purposes. The deductibility of losses is subject to limitations.
Shareholder information (continued)
172 Vodafone Group Plc
Annual Report 2013