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REAL ESTATE INVESTMENT TRUST

Capital Shopping Centres Group has been a UK Real Estate Investment Trust (’REIT’) since 1 January 2007.

A REIT is a UK company or group that invests in property and enjoys a measure of protection from corporation tax in return for an obligation to distribute a significant amount of the REIT’s cash flows to shareholders. As a REIT, Capital Shopping Centres Group doesn’t pay UK direct taxes on the income and capital gains from its qualifying UK property rental business (the ‘Tax Exempt Business‘).

Dividends

One requirement of the REIT regime is that a REIT must distribute to shareholders by way of a dividend at least 90% of taxable profits from its Tax Exempt Business in the form of a Property Income Distribution (’PID‘) each accounting period. Capital Shopping Centres Group may chose to designate any additional dividend above the 90% minimum PID as either a PID or an ordinary dividend (’non-PID‘).

Shareholders should note that the tax treatment of PID and non-PID dividends differs. Profits distributed as PIDs have not been taxed in the Company and therefore are potentially fully taxable (for UK tax purposes) in shareholders hands as property letting income. PIDs are subject to the deduction of a UK withholding tax, described below. Any non-PID dividends will be treated in the same way as dividends paid by non-REIT UK companies.

Withholding tax

Subject to limited exceptions, Capital Shopping Centres Group is required to withhold tax at source from its PIDs at the UK basic rate of income tax (which has been 20% since 6 April 2008).

UK resident shareholders: UK resident shareholders need only take action if they qualify for exemption from the REIT UK withholding tax (as described below). Shareholders will receive with each dividend payment a tax deduction certificate stating the amount of tax deducted.

UK shareholders who fall into one of the classes of shareholder able to claim an exemption from withholding tax may be able to receive a gross PID payment if they have submitted a valid relevant Exemption Declaration form (either as a beneficial owner of the shares, or as an intermediary if the shares are not registered in the name of the beneficial owner) to Capital Shopping Centres Group’s registrars, Capita Registrars, for the attention of Jai Baker, Client Services, The Registry, 34 Beckenham Road, Beckenham Kent BR3 4TU by the deadline stated in the dividend timetable. Examples of such classes are:

· UK Companies
· Charities
· Local Authorities
· UK Pension Schemes
· Managers of PEPs, ISAs and Child Trust Funds

A valid declaration form, once submitted, will continue to apply to future payments of PIDs until rescinded, and so it is a shareholder’s responsibility to notify Capital Shopping Centres Group if their circumstances change and they are no longer able to claim an exemption from withholding tax.

South African resident shareholders: South African resident shareholders (’SA shareholders’) should note that exemption declarations in respect of the UK withholding tax are not valid if made in respect of shares held on the South African register.

Recent and ongoing changes in SA tax regulations have created some uncertainty as to the future SA tax treatment of PIDs and non-PIDs, whether paid in cash or, under the Scrip Dividend Scheme , as shares. The main relevant changes are

· The definition of ‘foreign dividend’ for income tax and Dividends Tax purposes;
· Capital gains tax base cost of shares issued under the scrip dividend scheme; and
· Introduction of the new SA Dividends Tax for dividends paid after 1 April 2012.

Guidelines reflecting Capital Shopping Centres Group’s current understanding of the applicable tax treatments are given below. However, SA shareholders are advised to contact their own tax adviser or the South African Revenue Service (”SARS”) to confirm the current tax treatment of PIDs and non-PIDs . The SARS website contains full contact and other useful information.

For non-PIDS and PIDs paid in cash Non-PIDs paid to SA shareholders constitute a foreign dividend. Non-PIDS paid prior to 1 April 2012 suffered no withholding tax and were exempt from South African income tax. Non-PIDs paid after 1 April 2012 will be subject to SA Dividends Tax (at 15%) for non-exempt shareholders, but will remain exempt from South African income tax.

PIDs paid to SA shareholders constitute a foreign dividend. PIDs paid prior to 1 April 2012 suffered the UK withholding tax and were exempt from South African income tax. PIDs paid after 1 April 2012 will remain exempt from South African income tax, and would normally have been subject to the new Dividends Tax but the liability is offset as described below.

As stated above, a 20% UK withholding tax is deducted from PIDs. SA shareholders may be entitled, on application either as an individual or as a company, to a refund of the UK withholding tax from the UK’s HM Revenue & Customs (’HMRC’) (under the provisions of the UK/South African double tax treaty) of the tax withheld to the extent that it exceeds the treaty rate, currently 15%. Refunds of the UK withholding tax are not claimable from either Capital Shopping Centres Group or SARS, only from HMRC (see ‘HMRC Refund Applications for UK withholding tax’ below).

Obtaining the 5% refund from HMRC results in an effective UK withholding tax rate of 15% for SA shareholders. For PIDs paid after 1 April 2012 SA Shareholders are now liable to SA Dividend Tax which may be offset by the 15 per cent withholding tax suffered in the UK, resulting in no Dividend Tax being deducted.

For non-PIDS and PIDs paid in shares under the Scrip Dividend Scheme For guidelines on the anticipated tax treatment of shares received under the Scrip Dividend Scheme, please refer to the Scrip Dividend Booklet, originally published on 7 March 2012 but with the tax section updated to 30 April 2012, which is available to view or download from the Dividends page.

For PIDs, the share entitlement will be calculated from the net dividend (ie after the deduction of the UK withholding tax).

HMRC refund applications for UK withholding tax Both the HMRC refund application forms and examples of how the forms can be completed are available for download from the right hand column of this page. Please note that applications for refunds cannot be made before the date of receipt of the dividend payment. Applications may however be made retrospectively in respect of a number of dividends. Initial applications only require prior certification by SARS as to the shareholder’s SA tax status; subsequent applications may be sent directly to HMRC.

.Other shareholders resident outside the UK may also be able to claim a refund of the UK withholding tax (either as an individual or as a company) from HMRC subject to the terms of a double tax treaty, if any, between the UK and the country in which the shareholder is resident.

The above is based on Capital Shopping Centres Group’s understanding of current UK and South African tax law and HMRC’s and the South African fiscal authorities’ practice which are subject to change, possibly with retrospective effect. This summary does not constitute advice and Capital Shopping Centres Group PLC does not accept liability for any loss suffered by shareholders as a result of reliance on such contents. Shareholders should seek their own professional advice.

Major corporate shareholders

Capital Shopping Centres Group PLC may not, under REIT legislation, make a distribution to any corporate shareholder which is beneficially entitled (directly or indirectly) to 10 per cent. or more of the shares or dividends of the REIT, or if it controls (directly or indirectly) 10 per cent. or more of the voting rights of the REIT, unless the REIT has taken reasonable steps to avoid such a distribution being paid.

Page last updated 10/05/12

UK SHAREHOLDERS ONLY

Tax Exemption declaration form for beneficial owners of shares

Download beneficial owner form doc (28KB)

Tax Exemption declaration form for intermediaries (where shares are registered in a name other than that of the beneficial owner)

Download intermediary form doc (28KB)

CIRCULAR TO SHAREHOLDERS

Circular to shareholders 22 November 2006

Download circular pdf (303KB)

FURTHER INFORMATION

Additional REIT information is available on the HMRC website

Visit the HMRC website

Additonal SA tax information is available fron the SARS website

Visit the SARS website