Vodafone - Tax Guide

Please select your country from the drop-down menu to access the employee tax guide.

United States of America

Tax Guide

Vodafone Global Incentive Plan

Global Long Term Retention (GLTR) & Global Long Term Incentive (GLTI) Awards

Introduction

The following is a summary of the tax treatment of a GLTI/R award made to you by Vodafone under the Vodafone Global Incentive Plan (the "Plan"). This summary assumes that you have been resident in the United States of America during the lifecycle of the award, not on an international assignment and do not qualify for any expatriate tax regimes. If you moved internationally between the date of award and the date of vest, or you were on assignment for the whole period, then you should contact your KPMG advisor who will be able to explain how your award will be taxed.

The tax treatment as explained herein is intended as a guide only. It is limited to a general description of the national tax laws, and is not intended to address city, regional, or other local tax laws that may be applicable to you. It may not apply to your particular tax or financial situation, and we are not in a position to assure you of any particular tax result. Therefore, we recommend that you consult with your own independent tax advisor regularly to determine the consequences of taking or not taking any action concerning your shares, and to determine how the tax or other laws in the United States of America apply to your specific situation. This information was last reviewed in July, 2024.

Summary Overview

Summary Table
	Award	Vesting	Sale
Income tax / Capital gains tax	No	Income tax payable at rates up to 37%.	Capital gains tax payable at rates up to 37%.
Employee social tax	No	Yes FICA: Flat rate of 6.2% capped at earnings of USD 168,600 of income per year. Medicare: Uncapped flat rate of 1.45%. Additional Medicare: Uncapped flat rate of 0.9% after USD 200,000 of income per year.	No
Income tax withholding	No	Yes	No
Employee social tax withholding	No	Yes	No
Employee tax reporting	No	Yes	Yes
Employer tax reporting	No	Yes	No

Income Tax - The rates set out in this guide are marginal rates. In the event that you are required to pay income tax on the value of your award, the amount of income tax you pay will depend on your marginal tax rate. Generally, the more you earn, the higher your marginal income tax rate.

Award

Will I pay tax when I am granted an award under the Plan?

You will not have to pay any tax at the time you are granted an award under the Plan.

Vesting

Will I pay tax when my award vests?

When your award vests, income tax will be triggered on the market value of the shares at the time of vesting at rates of up to 37%.

Please note: Federal income tax withholding will apply at a rate of 22% on supplemental income up to USD 1,000,000 per year, and at a rate of 37% on earnings above that threshold.

In addition to Federal tax, State taxes may apply. In California, for example, a rate of 10.23% will be levied on supplemental income, however, income tax at a rate of 13.3% may apply.

What about any social taxes?

You will also be required to pay the following taxes:

FICA: For earnings up to USD 168,600 per year, you will be required to pay FICA on the market value of the shares when you receive these shares at a rate of 6.2%.
Medicare: When you receive your shares, you will be required to pay Medicare on the market value of the shares at a rate of 1.45%.
Additional Medicare: For earnings above USD 200,000 per year, you will be subject to an uncapped payment of 0.9% Additional Medicare on any benefits and income under the Plan.

How will any benefits under the Plan be reported?

Set out below are the reporting obligations that you and your local employer will need to fulfill when you receive and/or sell your shares.

Your Employer will report:

Any income tax and social security withheld on vesting of the shares in Form 941 to the tax authorities at the end of tax quarter.
Any income tax and social security withheld on vesting of the shares in Form W-3 to the tax authorities by January 31 of the following year.
Any income tax and social security withheld on vesting of the shares in Form W-2 (Wage and Tax Statement) to the employee by January 31 of the following year.

You will need to report:

Any income tax and social security due on vesting of the shares in Form 1040 to the tax authorities in the annual tax return, due by April 15.
Please note that a state tax return is also required. If your final rate of federal income tax is higher than the rate of withholding you may be required to make estimated tax payments to the IRS quarterly.
The return can be filed online and downloaded from this website: https://www.irs.gov/forms-pubs/about-form-1040.
Any capital gains tax due on the sale of shares in Form 1040 to the tax authorities in the annual tax return, due by April 15.
Schedule D/Form 8949 are used to calculate specific types of capital gain/loss, which is then transferred onto the 1040. You would not need a Schedule D/Form 8949 if you did not have any capital asset changes.

Will the company withhold any taxes from awards?

Vodafone will deduct and withhold tax on your behalf.

Any variance between the amount of tax withheld and your actual tax liability will be your responsibility.

Dividends

Will I have to pay any tax on any dividends paid on the shares?

A dividend is a right to participate in the company's profits, at the discretion of the board of directors.

Any dividends you receive will be taxed at rates up to 37%.

Tax treatment for dividends paid on the shares received under the Plan depends on whether or not they constitute "qualified dividends". Qualified dividends are taxed similarly as long-term capital gain, and are taxed at rates of 0%, 15% or 20%, depending on the individual’s total income for the year. Non-qualified dividends are taxed at ordinary income tax rates up to 37%. In addition, a Net Investment Income Tax of 3.8% (NIIT) is applicable to dividend amounts over USD 200,000 (for single filer taxpayers.) The NIIT is usually not applicable to non-resident aliens working outside the U.S. Please note that additional State and local taxes may apply.

Sale

Will I pay any tax when I sell my shares?

As the calculation of capital gains can be complex and may be subject to certain exemptions, we recommend that you consult your personal financial/tax advisor.

If the sale price of your shares is higher than their cost basis (broadly, the cost basis is equal to the fair market value of the shares at the time of vesting), the difference will be taxable as a capital gain, at a rate up to 37%. If the sale price is lower than the cost basis of the shares, you may realize a capital loss.

Federal and State level capital gains treatment may not follow the same approach, and both should be reviewed with an independent tax advisor.

The treatment of your capital gains depends on the holding period of your shares and can be considered long term (if you held the shares longer than 1 year from the taxable event) and short term (if you held the shares for less than one year from the taxable event).

The federal long-term capital gain tax rate will depend on the annual income and the filing status (below only for single filers) as follows:

for annual income less than or equal to USD 48,350, the rate applied is 0%
for annual income between USD 48,350 and USD 533,400, the rate applied is 15%
for annual income equal or exceeding USD 533,400, the rate applied is 20%

The federal short-term capital gains (i.e. shares held for less than 12 months prior to sale) are treated as ordinary income and taxed at progressive rates of up to 37%.

There is an additional Net Investment Income Tax of 3.8% (NIIT), applicable to amounts over USD 200,000 for single filer taxpayers. The NIIT is usually not applicable to non-resident aliens working outside the U.S.

When you sell your shares, the local company will not withhold any taxes on the gains. You should report any gain or loss arising in your tax return for the tax year in which the sale took place.

Additional Information

Wealth tax

No federal wealth tax is levied on an individual’s net worth. However, some states and municipalities impose a tax on an individual’s net worth.

Sample tax calculation

The following is an example of the tax implications upon vesting of shares and subsequent sale of shares under the Plan. This example assumes:

You were in the United States of America the whole time from grant to vest of the Global Long Term Retention (GLTR) & Global Long Term Incentive (GLTI) Awards award.
Even though the maximum income tax rate applicable is 37%, an income tax withholding rate of 22% is applied in the following example.
Federal social taxes of 2.35%.
Capital Gains Tax of 37%.
This example does not take into account any annual Capital Gains Tax (CGT) exemptions which may be available.
This illustration does not take into account any capped social tax amount.

Tax implications

Tax on Award
Award
No taxes due.

Tax on Vesting
Vesting
Number of Shares Vested	5000
Fair Market Value (FMV) of the Shares on Vesting	GBP 2
Taxable Income (5000 x GBP 2)	GBP 10,000
Federal Social Tax Withheld (GBP 10,000 x 2.35%)	GBP 235
Federal Income Tax Withheld (GBP 10,000 x 22%)	GBP 2,200
Total Tax Withheld (GBP 2,200 + GBP 235)	GBP 2,435
Net Income (GBP 10,000 - GBP 2,435)	GBP 7,565

Loading Graph 1

Tax on sale
Sale
Number of shares Sold	5000
Fair Market Value (FMV) of the shares on Sale	GBP 3
Sale Proceeds (5000 x GBP 3)	GBP 15,000
Less: Acquisition Costs
Amount Previously Taxed	GBP 10,000
Capital Gain	GBP 5,000
Tax Payable (GBP 5,000 x 37%)	GBP 1,850
Net Income (GBP 5,000 - GBP 1,850)	GBP 3,150

Loading Graph 2

* Please note the above is for information purposes only. Transaction fees may also apply and are not included.