Vodafone 2016 Annual Report Download - page 183

Taxation of capital gains
UK taxation
A US holder that is not resident in the UK will generally not be liable for
UK tax in respect of any capital gain realised on a disposal of our shares
or ADSs.
However, 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:
a is a citizen of the United States and is resident in the UK;
a is an individual who realises such a gain during a period of “temporary
non-residence” (broadly, where the individual becomes resident
in the UK, having ceased to be so resident for a period of ve years
or less, and was resident in the UK for at least four out of the seven tax
years immediately preceding the year of departure from the UK);
a is a US domestic corporation resident in the UK by reason of being
centrally managed and controlled in the UK; or
a is a citizen or a resident of the United States, or a US domestic
corporation, that has used, held or acquired the shares or ADSs
in connection with a branch, agency or permanent establishment
in the UK through which it carries on a trade, profession or vocation
in the UK.
In such circumstances, relief from double taxation may be available
under the treaty. Holders who may fall within one of the above
categories should consult their professional advisers.
US federal income taxation
Subject to the PFIC rules described below, a US holder that sells
or otherwise disposes of our shares or ADSs generally 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 adjusted tax basis, determined in US dollars, in the shares
or ADSs. This capital gain or loss will be a long-term capital gain or loss
if the US holder’s holding period in the shares or ADSs exceeds one year.
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.
Additional tax considerations
UK inheritance tax
An individual who is domiciled in the United States (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 United States 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 amount or value of the consideration
or the value of the shares, could also be payable in these circumstances
but no SDRT will be payable if stamp duty equal to such SDRT liability
is paid.
Following rulings of the European Court of Justice and the rst-tier tax
tribunal in the UK, HMRC have conrmed that the 1.5% SDRT charge
will not be levied on an issue of shares to a depositary receipts system
on the basis that such a charge is contrary to EU law.
No stamp duty should in practice be required to be paid 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 if, within six years of the date of the
agreement, an instrument transferring the shares is executed, any SDRT
which has been paid would be repayable 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 for our current taxable year
or the foreseeable future. This conclusion is a factual determination
that is made annually and thus is subject to change. If we are treated
as a PFIC, US holders of shares would be required (i) to pay a special
US addition to tax on certain distributions and (ii) any gain realised
on the sale or other disposition of the shares or ADSs would in general
not be treated as a 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
preceding year beginning with the rst such year in which our shares
or ADSs were treated as stock in a PFIC would also apply. In addition,
dividends received from us would not be eligible for the reduced rate
of tax described above under “Taxation of Dividends – US federal
income taxation”.
Back-up 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. Back-up 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 comply with applicable certication requirements.
Certain US holders are not subject to back-up withholding. US holders
should consult their tax advisors about these rules and any other
reporting obligations that may apply to the ownership or disposition
of shares or ADSs, including requirements related to the holding
of certain foreign nancial assets.
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Vodafone Group Plc
Annual Report 2016
181