Vodafone 2016 Annual Report Download - page 182

A US holder is a benecial owner of shares or ADSs that is for US federal
income tax purposes:
a an individual citizen or resident of the United States;
a a US domestic corporation;
a an estate, the income of which is subject to US federal income tax
regardless of its source; or
a a trust, if a US court can exercise primary supervision over the
trust’s administration and one or more US persons are authorised
to control all substantial decisions of the trust, or the trust has validly
elected to be treated as a domestic trust for US federal income
tax purposes.
If an entity or arrangement treated as a partnership for US federal
income tax purposes holds the shares or ADSs, the US federal income
tax treatment of a partner will generally depend on the status of the
partner and the tax treatment of the partnership. Holders that are
entities or arrangements treated as partnerships for US federal income
tax purposes should consult their tax advisors concerning the US federal
income tax consequences to them and their partners of the ownership
and disposition of shares or ADSs by the partnership.
This section is based on the US Internal Revenue Code of 1986,
as amended, its legislative history, existing and proposed regulations
thereunder, published rulings and court decisions, and on the tax
laws of the UK, the Double Taxation Convention between the United
States and the UK (the ‘treaty’) and current HM Revenue and Customs
published practice, all as currently in effect. These laws are subject
to change, possibly on a retroactive basis. This section also assumes that
the UK Finance Bill, as ordered to be published on 24 March 2016, will
be enacted without amendment.
This section is further based in part upon the representations of the
depositary and assumes that each obligation in the deposit agreement
and any related agreement will be performed in accordance with
its terms.
For the purposes of the treaty and the US–UK double taxation
convention relating to estate and gift taxes (the ‘Estate Tax Convention’),
and for US federal income tax and UK tax purposes, this section
is based on the assumption that a holder of ADRs evidencing ADSs
will generally be treated as the owner of the shares in the Company
represented by those ADRs. Investors should note that a ruling by the
rst-tier tax tribunal in the UK has cast doubt on this view, but HMRC
have stated that they will continue to apply their long-standing practice
of regarding the holder of such ADRs as holding the benecial interest
in the underlying shares. Similarly, the US Treasury has expressed
concern that US holders of depositary receipts (such as holders
of ADRs representing our ADSs) may be claiming foreign tax credits
in situations where an intermediary in the chain of ownership between
such holders and the issuer of the security underlying the depositary
receipts, or a party to whom depositary receipts or deposited shares
are delivered by the depositary prior to the receipt by the depositary
of the corresponding securities, has taken actions inconsistent with
the ownership of the underlying security by the person claiming the
credit, such as a disposition of such security. Such actions may also
be inconsistent with the claiming of the reduced tax rates that may
be applicable to certain dividends received by certain non-corporate
holders, as described below. Accordingly, (i) the creditability of any
UK taxes and (ii) the availability of the reduced tax rates for any dividends
received by certain non-corporate US Holders, each as described below,
could be affected by actions taken by such parties or intermediaries.
Generally exchanges of shares for ADRs and ADRs for shares will not
be subject to US federal income tax or to UK tax other than stamp duty
or stamp duty reserve tax (see the section on these taxes on page 181).
Taxation of dividends
UK taxation
Under current UK law, no amount will be required to be withheld
on account of UK tax from the dividends that 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.
Individual shareholders in the Company who are residents in the UK will
be subject to the income tax on the dividends we pay. For dividends
received before 6 April 2016, a tax credit equal to one-ninth of the cash
dividend will be available. For dividends received on or after 6 April
2016 dividends received will no longer be eligible for tax credit and will
be taxable in the UK at the dividend rates applicable where the income
received is above the tax-free dividend allowance (£5,000 per tax year).
US federal income taxation
Subject to the passive foreign investment company (‘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). However, the Company does not maintain
calculations of its earnings and prots in accordance with US federal
income tax accounting principles. US holders should therefore assume
that any distribution by the Company with respect to shares will
be reported as ordinary dividend income. Dividends paid to a non-
corporate US holder will be taxable to the holder at the reduced rate
normally applicable to long-term capital gains provided that certain
requirements are met.
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.
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 the
dividends are received by the US holder, in the case of shares, or the
depositary, in the case of ADSs, regardless of whether the payment
is in fact converted into US dollars at that time. If dividends received
in pounds sterling are converted into US dollars on the day they are
received, the US holder generally will not be required to recognise any
foreign currency gain or loss in respect of thedividend income.
Where UK tax is payable on any dividends received, a foreign tax credit
may be claimable under the treaty.
Vodafone Group Plc
Annual Report 2016
180
Shareholder information (continued)
Unaudited information