Vodafone 2012 Annual Report Download - page 157

Business review Performance Governance Financials Additional information
155
Vodafone Group Plc
Annual Report 2012
Taxation of dividends
UK taxation
Under current UK tax law no withholding tax will be deducted from
thedividends 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.
A shareholder in the Company who is an individual resident for UK tax
purposes in the United Kingdom is entitled, in calculating their liability to
UK income tax, to a tax credit on cash dividends we pay on our shares or
ADSs and the tax credit is equal to one-ninth of the cash dividend.
US federal income taxation
Subject to the 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). Dividends paid to a non-corporate
US holder in tax years beginning before 1 January 2013 that constitute
qualied dividend income will be taxable to the holder at a maximum
taxrate of 15% provided that the ordinary shares or ADSs are held for
more than 60 days during the 121 day period beginning 60 days
beforethe ex-dividend date and the holder meets other holding period
requirements. Dividends paid by us with respect to the shares or ADSs
will generally be qualied dividend income. A US holder is not subject
toa UK withholding tax. The US holder includes in gross income for US
federal income tax purposes only the amount of the dividend actually
received from us and the receipt of a dividend does not entitle the
USholder to a foreign tax credit.
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. Dividends will
be income from sources outside the United States. For the purpose of
the foreign tax credit limitation, foreign source income is classied in one
or two baskets and the credit for foreign taxes on income in any basket is
limited to US federal income tax allocable to that income. Generally the
dividends we pay will constitute foreign source income in the passive
income basket.
In the case of shares, 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 of the dividend distribution regardless of whether
thepayment is in fact converted into US dollars. Generally any gain
orloss resulting from currency exchange uctuations during the
periodfrom the date the dividend payment is to be included in
incometo the date the payment is converted into US dollars will be
treated as ordinary income or loss. Generally the gain or loss will be
income or loss from sources within the United States for foreign tax
credit limitation purposes.
Taxation of capital gains
UK taxation
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 is:
a a citizen of the United States resident or ordinarily resident for UK tax
purposes in the United Kingdom;
a a citizen of the United States who has been resident or ordinarily
resident for UK tax purposes in the United Kingdom, ceased to be so
resident or ordinarily resident for a period of less than ve years of
assessment and who disposed of the shares or ADSs during that
period (a ‘temporary non-resident’), unless the shares or ADSs
werealso acquired during that period, such liability arising on that
individual’s return to the UK;
a a US domestic corporation resident in the United Kingdom by reason
of being centrally managed and controlled in the United Kingdom; or
a a citizen of the United States or a US domestic corporation that
carries on a trade, profession or vocation in the United Kingdom
through a branch or agency or, in the case of US domestic
companies, through a permanent establishment and that has used
the shares or ADSs for the purposes of such trade, profession or
vocation or has used, held or acquired the shares or ADSs for the
purposes of such branch or agency or permanent establishment.
Under the treaty capital gains on dispositions of the shares or ADSs are
generally subject to tax only in the country of residence of the relevant
holder as determined under both the laws of the United Kingdom and
the United States and as required by the terms of the treaty. However,
individuals who are residents of either the United Kingdom or the United
States and who have been residents of the other jurisdiction (the US or
the UK, as the case may be) at any time during the six years immediately
preceding the relevant disposal of shares or ADSs may be subject to tax
with respect to capital gains arising from the dispositions of the shares or
ADSs not only in the country of which the holder is resident at the time
of the disposition but also in that other country (although, in respect of
UK taxation, generally only to the extent that such an individual
comprises a temporary non-resident).
US federal income taxation
Subject to the PFIC rules described below a US holder that sells or
otherwise disposes of our shares or ADSs 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 tax basis,
determined in US dollars, in the shares or ADSs. Generally a capital gain
of a non-corporate US holder that is recognised in tax years beginning
before 1 January 2013 is taxed at a maximum rate of 15% provided the
holder has a holding period of more than one year. The gain or loss will
generally be income or loss from sources within the United States for
foreign tax credit limitation purposes. The deductibility of losses is
subject to limitations.