Vodafone 2013 Annual Report Download - page 175

Additional tax considerations
UK inheritance tax
An individual who is domiciled in the US (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 our 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 xed 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 US 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 our shares 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.
Aruling by the European Court of Justice has determined that the
1.5% SDRT charges on issue of shares to a clearance service is contrary
to EU law. As a result of that ruling, HMRC indicated that where new
shares are rst issued to a clearance service or to a depositary within the
EU, the 1.5% SDRT charge will not be levied. Subsequently, a decision
by the rst-tier tax tribunal in the UK extended this ruling to the issue
of shares (or, where it is integral to the raising of new capital, the transfer
of shares) to depositary receipts systems wherever located. HMRC
have stated that they will not seek to appeal this decision and, assuch,
will no longer seek to impose 1.5% SDRT on the issue of shares (or,
where it is integral to the raising of new capital, the transfer of shares)
to a clearance service or to a depositary, wherever located. Investors
should, however, be aware that this area may be subject to further
developments in the future.
No stamp duty will be payable on any transfer of our ADSs provided
thatthe ADSs and any separate instrument of transfer are executed
andretained at all times outside the UK. A transfer of our shares
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
our shares 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 our ADSs will not give rise to SDRT.
PFIC rules
We do not believe that our shares or ADSs will be treated as stock
of aPFIC for US federal income taxpurposes. This conclusion
is a factual determination that is made annually and thus is subject
to change. If we are 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 us would not be eligible for the preferential
tax rate applicable to qualied dividend income for certain non-
corporate holders.
Backup withholding and information reporting
Payments of dividends and other proceeds to a US holder with respect
to shares or ADSs, by a US paying agent or other US intermediary will be
reported to the Internal Revenue Service (‘IRS’) and to the US holder as
may be required under applicable regulations. Backup withholding may
apply to these payments if the US holder fails to provide an accurate
taxpayer identication number or certication of exempt status or
failsto report all interest and dividends required to be shown on its US
federal income tax returns. Certain US holders are not subject to backup
withholding. US holders should consult their tax advisors as to their
qualication for exemption from backup withholding and the procedure
for obtaining an exemption.
Foreign nancial asset reporting
Legislation enacted in 2010 imposes new reporting requirements
on US holders with respect to the holding of certain foreign nancial
assets, including equity of foreign entities, if the aggregate value of all
of these assets exceeds US$50,000. The shares and ADSs are expected
to constitute foreign nancial assets subject to these requirements
unless the shares and ADSs are held in an account at a nancial
institution (in which case, the account may be reportable if maintained
by a foreign nancial institution). US holders should consult their tax
advisors regarding the application of this legislation.
173 Vodafone Group Plc
Annual Report 2013
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