RBS 2007 Annual Report Download - page 245

243
RBS Group • Annual Report and Accounts 2007
Shareholder information
Taxation for US Holders
The following discussion summarises certain US federal and
UK tax consequences of the acquisition, ownership and
disposition of ordinary shares, non-cumulative dollar
preference shares, ADSs representing ordinary shares
(“ordinary ADSs”), ADSs representing non-cumulative dollar
preference shares (“preference ADSs”) or PROs by a
beneficial owner that is a citizen or resident of the United
States or that otherwise will be subject to US federal income
tax on a net income basis in respect of the ordinary shares,
non-cumulative dollar preference shares, ordinary ADSs,
preference ADSs or PROs (a “US Holder”). This summary
assumes that a US Holder is holding ordinary shares, non-
cumulative dollar preference shares, ordinary ADSs,
preference ADSs or PROs, as applicable, as capital assets.
This summary does not address the tax consequences to a US
Holder (i) that is resident (or, in the case of an individual,
ordinarily resident) in the UK for UK tax purposes or (ii)
generally, that is a corporation which alone or together with one
or more associated companies, controls, directly or indirectly,
10% or more of the voting stock of the company.
The statements and practices set forth below regarding US
and UK tax laws, including the US/UK double taxation
convention relating to income and capital gains which entered
into force on 31 March 2003 (the “Treaty”), and the US/UK
double taxation convention relating to estate and gift taxes (the
“Estate Tax Treaty”), are based on those laws and practices as
in force and as applied in practice on the date of this Report.
This summary is not exhaustive of all possible tax
considerations and holders are advised to satisfy themselves
as to the overall tax consequences, including specifically the
consequences under US federal, state, local and other laws,
and possible changes in taxation law, of the acquisition,
ownership and disposition of ordinary shares, non-cumulative
dollar preference shares, ordinary ADSs, preference ADSs or
PROs by consulting their own tax advisers.
The following discussion assumes that the Company is not,
and will not become, a passive foreign investment company
(‘PFIC’) – see ‘Passive Foreign Investment Company
Considerations’ on page 246.
Ordinary shares, preference shares, ordinary ADSs and
preference ADSs
Taxation of dividends
For the purposes of the Treaty, the Estate Tax Treaty and the
US Internal Revenue Code of 1986, as amended (the “Code”),
US Holders of ordinary ADSs and preference ADSs should be
treated as owners of the ordinary shares and the non-
cumulative dollar preference shares underlying such ADSs.
The US Treasury has expressed concerns that parties to whom
ADSs are pre-released or intermediaries in the chain of
ownership between US Holders and the issuer of the security
underlying the ADSs may be taking actions that are
inconsistent with the claiming of foreign tax credits for US
Holders of ADSs. Such actions would also be inconsistent with
the claiming of the reduced rate of tax applicable to dividends
received by certain non-corporate US Holders. Accordingly,
availability of the reduced tax rate for dividends received by
certain non-corporate US Holders of ordinary ADSs could be
affected by actions taken by such parties or intermediaries.
The company is not required to withhold UK tax at source from
dividend payments it makes or from any amount (including any
amounts in respect of accrued dividends) distributed by the
company. US Holders who are not resident or ordinarily
resident in the UK and who do not carry on a trade, profession
or vocation in the UK through a branch, agency or permanent
establishment in connection with which their ordinary shares,
non-cumulative preference shares, ordinary ADSs or
preference ADSs are held used or acquired will not be subject
to UK tax in respect of any dividends received on the relevant
shares or ADSs.
Distributions by the company will constitute foreign source
dividend income for US federal income tax purposes to the
extent paid out of the current or accumulated earnings and
profits of the company, as determined for US federal income
tax purposes. Because the company does not maintain
calculations of its earnings and profits under US federal
income tax principles, it is expected that distributions will be
reported to US Holders as dividends. Payments will not be
eligible for the dividends-received deduction allowed to
corporate US Holders.
Subject to applicable limitations that may vary depending upon
a holder’s individual circumstances, dividends paid to certain
non-corporate US Holders in taxable years beginning before
1 January 2011 will be taxable at a maximum tax rate of 15%.
Non-corporate US Holders should consult their own tax
advisers to determine whether they are subject to any special
rules that limit their ability to be taxed at this favourable rate.
Dividends will be included in a US Holder’s income on the date
of the US Holder’s (or in the case of ADSs, the Depositary’s)
receipt of the dividend. The amount of any dividend income
paid in pounds sterling or euros will be a US dollar amount
calculated by reference to the relevant exchange rate in effect
on the date of such receipt regardless of whether the payment
is in fact converted into US dollars. If the dividend is converted
into US dollars on the date of receipt, the US Holder generally
should not be required to recognise foreign currency gain or
loss in respect of the dividend income. If the amount of such
dividend is not converted into US dollars on the date of
receipt, the US Holder may have foreign currency gain or loss.