Vodafone 2014 Annual Report Download - page 190

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 passive foreign investment corporation (‘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 of 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, the treaty provides that
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).
We published tax information relating to the return of value here:
vodafone.com/investor.
US federal income taxation
Subject to the passive foreign investment company 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 US federal income tax rate of 20% 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.
Vodafone Group Plc
Annual Report 2014188
Shareholder information (continued)