HSBC 2004 Annual Report Download - page 361

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will be treated as qualified dividends if (i) HSBC
Holdings was not, in the year prior to the year in
which the dividend was paid and is not in the year in
which the dividend is paid, a passive foreign
investment company (‘PFIC’ ), and (ii) for dividends
paid in the 2004 taxable year, HSBC Holdings was
not a foreign personal holding company (‘FPHC’ ) or
foreign investment company (‘FIC’ ) with respect to
its 2003 or 2004 taxable year. Based on the
company’ s audited financial statements and relevant
market and shareholder data, HSBC Holdings
believes that it was not treated as a PFIC, FPHC or
FIC for US Federal income tax purposes with respect
to its 2003 or 2004 taxable year. In addition, based
on the company’ s audited financial statements and
current expectations regarding the value and nature
of its assets, the sources and nature of its income,
and relevant market data, HSBC Holdings does not
anticipate becoming a PFIC for its 2005 taxable
year.
Taxation of capital gains
Gains realised by an eligible US holder on the sale or
other disposition of shares or ADSs normally will
not be subject to UK taxation unless at the time of
the sale or other disposition the holder carries on a
trade, profession or vocation in the United Kingdom
through a branch or agency or permanent
establishment and the shares or ADSs are or have
been used, held or acquired for the purposes of such
trade, profession, vocation, branch or agency or
permanent establishment. Such gains will be
included in income for US tax purposes, and will be
long-term capital gains if the shares or ADSs were
held for more than one year. A long-term capital
gain realised by an individual holder generally is
subject to US tax at a maximum rate of 5 or 15 per
cent.
Stamp duty and stamp duty reserve tax –
ADSs
If shares are transferred into a clearance service or
depository receipt arrangement (which will include a
transfer of shares to the Depository) UK stamp duty
and/or stamp duty reserve tax will be payable. The
stamp duty or stamp duty reserve tax is generally
payable on the consideration for the transfer and is
payable at the aggregate rate of 1.5 per cent. The
amount of stamp duty reserve tax payable on such a
transfer will be reduced by any stamp duty paid in
connection with the same transfer.
No stamp duty will be payable on the transfer
of, or agreement to transfer, an ADS, provided that
the ADR and any separate instrument of transfer or
written agreement to transfer remain at all times
outside the United Kingdom, and provided further
that any such transfer or written agreement to
transfer is not executed in the United Kingdom. No
stamp duty reserve tax will be payable on a transfer
of, or agreement to transfer, an ADS effected by the
transfer of an ADR.
On a transfer of shares from the Depository to a
registered holder of an ADS upon cancellation of the
ADS, a fixed stamp duty of £5 per instrument of
transfer will be payable by the registered holder of
the ADR cancelled.
US backup withholding tax and information
reporting
Distributions made on shares and proceeds from the
sale of shares or ADSs that are paid within the
United States, or through certain financial
intermediaries to US holders, are subject to
information reporting and may be subject to a US
‘backup’ withholding tax unless, in general, the US
holder complies with certain certification procedures
or is a corporation or other person exempt from such
withholding. Holders that are not US persons
generally are not subject to information reporting or
backup withholding tax, but may be required to
comply with applicable certification procedures to
establish that they are not US persons in order to
avoid the application of such information reporting
requirements or backup withholding tax to payments
received within the United States or through certain
financial intermediaries.