Shanghai-Hong Kong Stock Connect Officially Launched

The Stock Exchange of Hong Kong Limited (SEHK), Shanghai Stock Exchange (SSE), China Securities Depository and Clearing Corporation Limited (ChinaClear) and Hong Kong Securities Clearing Company Limited (HKSCC) officially launched the pilot programme of Shanghai-Hong Kong Stock Connect in November 17, 2014, for establishing mutual stock market access between Hong Kong and mainland China.

This new cross-border investment channel brought by the Shanghai-Hong Kong Stock Connect will enable investors in the Mainland and Hong Kong to trade a specified range of listed stocks in each other’s market through their respective local securities companies, thereby helping to promote and strengthen the connection between the Mainland and Hong Kong capital markets. For Hong Kong and overseas investors, they are now able to trade eligible Shanghai-listed A-shares, around 600 at this stage and basically SSE 180 Index and SSE 380 Index constituent shares as well as A+H shares, directly through Shanghai-Hong Kong Stock Connect.

Tax and exemption

China's Ministry of Finance along with State Administration of Taxation and China Securities Regulatory Commission, jointly announced on November 14, 2014 and recognized that from November 17, 2014:

•     Income tax

Gains derived by Hong Kong and overseas investors from transfer of A shares listed on SSE is temporarily exempt from income tax.

Dividends derived by Hong Kong and overseas investors from investing in A shares listed on SSE, the listed companies will withhold income tax at a tax rate of 10%. For those investors who are tax residents of other countries and the tax rate applicable to dividends is lower than 10% under the tax treaty between China and their residence countries, the difference will be refunded under application and approval.

•     Business tax

Gains derived by Hong Kong and overseas investors from transfer of A shares listed on SSE is temporarily exempt from business tax.

•     Stamp duty

Stamp duty of shares transactions is paid at a tax rate of 0.1%.

For more information, feel free to contact us.

Author: Pan-China Certified Public Accountants LLP.

Shanghai-Hong Kong Stock Connect (499.44Kb)