BP Annual Report and Form 20-F 2011 - Company Reporting

Additional information for shareholdersUS federal income taxationA US holder is subject to US federal income taxation on the gross amountof any dividend paid by the company out of its current or accumulatedearnings and profits (as determined for US federal income tax purposes).Dividends paid to a non-corporate US holder in taxable years beginningbefore 1 January 2013 that constitute qualified dividend income will betaxable to the holder at a maximum tax rate of 15%, provided that theholder has a holding period in the ordinary shares or ADSs of more than60 days during the 121-day period beginning 60 days before the exdividenddate and meets other holding period requirements. Dividendspaid by the company with respect to the shares or ADSs will generally bequalified dividend income.As noted above in UK taxation, a US holder will not be subject toUK withholding tax. A US holder will include in gross income for US federalincome tax purposes the amount of the dividend actually received from thecompany, and the receipt of a dividend will not entitle the US holder to aforeign tax credit.For US federal income tax purposes, a dividend must be includedin income when the US holder, in the case of ordinary shares, or theDepositary, in the case of ADSs, actually or constructively receives thedividend and will not be eligible for the dividends-received deductiongenerally allowed to US corporations in respect of dividends received fromother US corporations. Dividends will be income from sources outside theUS and generally will be ‘passive category income’ or, in the case of certainUS holders, ‘general category income’, each of which is treated separatelyfor purposes of computing a US holder’s foreign tax credit limitation.The amount of the dividend distribution on the ordinary sharesor ADSs that is paid in pounds sterling will be the US dollar value of thepounds sterling payments made, determined at the spot pounds sterling/US dollar rate on the date the dividend distribution is includible in income,regardless of whether the payment is, in fact, converted into US dollars.Generally, any gain or loss resulting from currency exchange fluctuationsduring the period from the date the pounds sterling dividend payment isincludible in income to the date the payment is converted into US dollarswill be treated as ordinary income or loss and will not be eligible for the15% tax rate on qualified dividend income. The gain or loss generallywill be income or loss from sources within the US for foreign tax creditlimitation purposes.Distributions in excess of the company’s earnings and profits, asdetermined for US federal income tax purposes, will be treated as a returnof capital to the extent of the US holder’s basis in the ordinary shares orADSs and thereafter as capital gain, subject to taxation as described inTaxation of capital gains – US federal income taxation section below.In addition, the taxation of dividends may be subject to the rulesfor passive foreign investment companies (PFIC), described below under‘Taxation of capital gains – US federal income taxation’. Distributions madeby a PFIC do not constitute qualified dividend income and are not eligiblefor the 15% tax rate.Taxation of capital gainsUK taxationA US holder may be liable for both UK and US tax in respect of a gainon the disposal of ordinary shares or ADSs if the US holder is (i) a citizenof the US resident or ordinarily resident in the UK, (ii) a US domesticcorporation resident in the UK by reason of its business being managed orcontrolled in the UK or (iii) a citizen of the US or a corporation that carrieson a trade or profession or vocation in the UK through a branch or agencyor, in respect of corporations for accounting periods beginning on orafter 1 January 2003, through a permanent establishment, and that haveused, held, or acquired the ordinary shares or ADSs for the purposes ofsuch trade, profession or vocation of such branch, agency or permanentestablishment. However, such persons may be entitled to a tax creditagainst their US federal income tax liability for the amount of UK capitalgains tax or UK corporation tax on chargeable gains (as the case may be)that is paid in respect of such gain.Under the Treaty, capital gains on dispositions of ordinary shares or ADSsgenerally will be subject to tax only in the jurisdiction of residence of therelevant holder as determined under both the laws of the UK and the USand as required by the terms of the Treaty.Under the Treaty, individuals who are residents of either the UK orthe US and who have been residents of the other jurisdiction (the US orthe UK, as the case may be) at any time during the six years immediatelypreceding the relevant disposal of ordinary shares or ADSs may be subjectto tax with respect to capital gains arising from a disposition of ordinaryshares or ADSs of the company not only in the jurisdiction of whichthe holder is resident at the time of the disposition but also in the otherjurisdiction.US federal income taxationA US holder who sells or otherwise disposes of ordinary shares or ADSswill recognize a capital gain or loss for US federal income tax purposesequal to the difference between the US dollar value of the amount realizedand the holder’s tax basis, determined in US dollars, in the ordinary sharesor ADSs. Any capital gain of a non-corporate US holder is generally taxed atpreferential rates if the holder’s holding period for such ordinary shares orADSs exceeds one year. The gain or loss will generally be income or lossfrom sources within the US for foreign tax credit limitation purposes. Thedeductibility of capital losses is subject to limitations.We do not believe that ordinary shares or ADSs will be treated asstock of a passive foreign investment company, or PFIC, for US federalincome tax purposes, but this conclusion is a factual determination thatis made annually and thus is subject to change. If we are treated as aPFIC, unless a US holder elects to be taxed annually on a mark-to-marketbasis with respect to ordinary shares or ADSs, any gain realized on thesale or other disposition of ordinary shares or ADSs would in general notbe treated as capital gain. Instead, a US holder would be treated as if heor she had realized such gain rateably over the holding period for ordinaryshares or ADSs and would be taxed at the highest tax rate in effect foreach such year to which the gain was allocated, in addition to which aninterest charge in respect of the tax attributable to each such year wouldapply. Certain ‘excess distributions’ would be similarly treated if we weretreated as a PFIC.Additional tax considerationsScrip Dividend ProgrammeThe company has introduced an optional Scrip Dividend Programme,wherein holders of ordinary shares or ADSs may elect to receive anydividends in the form of new, fully-paid ordinary shares or ADSs ofthe company, instead of cash. Please consult your tax adviser for theconsequences to you.UK inheritance taxThe Estate Tax Convention applies to inheritance tax. ADSs held by anindividual who is domiciled for the purposes of the Estate Tax Conventionin the US and is not for the purposes of the Estate Tax Conventiona national of the UK will not be subject to UK inheritance tax on theindividual’s death or on transfer during the individual’s lifetime unless,among other things, the ADSs are part of the business property of apermanent establishment situated in the UK used for the performance ofindependent personal services. In the exceptional case where ADSs aresubject to both inheritance tax and US federal gift or estate tax, the EstateTax Convention generally provides for tax payable in the US to be creditedagainst tax payable in the UK or for tax paid in the UK to be credited againsttax payable in the US, based on priority rules set forth in the Estate TaxConvention.Additional information for shareholdersBP Annual Report and Form 20-F 2011 169