Vodafone 2014 Annual Report Download - page 191

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
noncorporate 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
US taxpayers that own certain foreign nancial assets, including
debt and equity of foreign entities, with an aggregate value in excess
of US$50,000 at the end of the taxable year or US$75,000 at any time
during the taxable year (or, for certain individuals living outside the
United States and married individuals ling joint returns, certain higher
thresholds) may be required to le an information report with respect
to such assets with their tax returns. The shares constitute foreign
nancial assets subject to these requirements unless the shares 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 the rules
relating to foreign nancial asset reporting.
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