Program to Exempt Investors from Paying Taxes from Buying Chinese Stocks
Potentially removing a stumbling block for global investors that are eagerly anticipating to buy Chinese mainland stocks for the first time, China will be temporarily exempt taxes on the profits that are made from a landmark program that will be linking Hong Kong and Shanghai stock exchanges.
Several market players were happy with the announcement although Chinese regulators have left themselves some wiggle room to apply taxes to foreign investors during a later date. The shanghai Hong Kong stock connection will be launched today and will allow international investors to trade Shanghai listed shares using the Hong Kong stock exchange. Mainland investors will be allowed to trade Hong Kong shares with Shanghai Stock Exchange.
Although the program is constrained by quotas at first, it has the potential to create the third largest stock market after the two boards are fully integrated. Major concerns are also expressed on the implementation and a tax policy for the program as clarity on the tax policy is being awaited especially when the programs is about to be launched.
Companies and individuals in Hong Kong that are buying shares in Shanghai will be temporarily exempted from paying income tax on their gains. Mainland individuals buying shores in Hong Kong will be exempted and will be liable for tax on dividends.