HSBC 2012 Annual Report Download - page 525

523
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
Paperless transfers of shares within CREST, the
UK’s paperless share transfer system, are liable to
stamp duty reserve tax at the rate of 0.5% of the
consideration. In CREST transactions, the tax
is calculated and payment made automatically.
Deposits of shares into CREST generally will not be
subject to stamp duty reserve tax, unless the transfer
into CREST is itself for consideration. Following the
case HSBC pursued before the European Court of
Justice (Case C-569/07 HSBC Holdings plc and
Vidacos Nominees Ltd v The Commissioners for
HM Revenue & Customs) and a subsequent case in
relation to depositary receipts, HMRC now accepts
that the charge to stamp duty reserve tax at 1.5% on
the issue of shares to a depositary receipt issuer or a
clearance service is prohibited.
Taxation – US residents
The following is a summary, under current law,
of the principal UK tax and US federal income tax
considerations that are likely to be material to the
ownership and disposition of shares or American
Depositary Shares (‘ADS’s) by a holder that is a
resident of the US for US federal income tax
purposes (a ‘US holder’) and who is not resident
(while it remains relevant to the charge to UK capital
gains tax) ordinarily resident in the UK for UK tax
purposes. Holders and prospective purchasers should
note that the UK Government has announced that
ordinary residence will cease to be relevant to the
charge to UK capital gains tax for the tax year
2013-14 and subsequent tax years.
The summary does not purport to be a
comprehensive description of all of the tax
considerations that may be relevant to a holder of
shares or ADSs. In particular, the summary deals
only with US holders that hold shares or ADSs as
capital assets, and does not address the tax treatment
of holders that are subject to special tax rules, such
as banks, tax-exempt entities, insurance companies,
dealers in securities or currencies, persons that hold
shares or ADSs as part of an integrated investment
(including a ‘straddle’) comprised of a share or ADS
and one or more other positions, and persons that
own, directly or indirectly, 10% or more of the
voting stock of HSBC Holdings. This discussion
is based on laws, treaties, judicial decisions and
regulatory interpretations in effect on the date
hereof, all of which are subject to change.
Holders and prospective purchasers should
consult their own advisers regarding the tax
consequences of an investment in shares or ADSs
in light of their particular circumstances, including
the effect of any national, state or local laws.
Any US federal tax advice included in this
Annual Report and Accounts is for informational
purposes only; it was not intended or written to be
used, and cannot be used, for the purpose of
avoiding US federal tax penalties.
Taxation of dividends
Currently no tax is withheld from dividends paid by
HSBC Holdings. A US holder must include cash
dividends paid on the shares or ADSs in ordinary
income on the date that such holder or the ADS
depositary receives them, translating dividends paid
in UK pounds sterling into US dollars using the
exchange rate in effect on the date of receipt. A US
holder that elects to receive shares in lieu of a cash
dividend must include in ordinary income the fair
market value of such shares on the dividend payment
date, and the tax basis of those shares will equal such
fair market value.
Subject to certain exceptions for positions that
are held for less than 61 days or are hedged, and
subject to a foreign corporation being considered a
‘qualified foreign corporation’ (which includes not
being classified for US federal income tax purposes
as a passive foreign investment company), certain
dividends (‘qualified dividends’) received by an
individual US holder generally will be subject to US
taxation at maximum rates. Based on the company’s
audited financial statements and relevant market and
shareholder data, HSBC Holdings does not
anticipate being classified as a passive foreign
investment company. Accordingly, dividends paid
on the shares or ADSs generally should be treated as
qualified dividends.
Taxation of capital gains
Gains realised by a 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 UK 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 will be subject to US tax at preferential
rates.