|Tax Treaty Changes Boost HK-Shanghai Stock Trading|
Hong Kong Exchanges and Clearing Limited's securities market turnover has risen to a record high, and the recent signing of the fourth Protocol to the China-Hong Kong double taxation agreement (DTA) will further boost trading activity through the Shanghai-Hong Kong Stock Connect (SHKSC) program.
Hong Kong Exchanges and Clearing Limited's (HKEx) securities market turnover rose to HKD252.4bn (USD32.5bn) on April 8, far exceeding the previous record of HKD211bn set on October 3, 2007, as total daily trading through SHKSC surged to RMB29.9bn (USD4.8bn), its best level since its launch in November last year.
On the same day, the market capitalization of Hong Kong-listed shares also reached a record high, climbing to HKD28.6 trillion, and a record 3.1m trades were concluded in the securities market (the previous high was 1.9m on March 31 this year).
Signed on April 1, the DTA's fourth Protocol clarifies the conditions under which an investment fund would qualify for Hong Kong resident status. This provides certainty to investment funds' application of their tax arrangements, and confirms that gains derived by a Hong Kong resident from the sale and purchase of shares in a Mainland-listed company will be taxable only in Hong Kong (where there is no such tax).
The latter confirmation is applicable, for example, to gains derived by a Hong Kong resident from the sale and purchase of A shares listed on the Shanghai Stock Exchange under SHKSC. It will therefore also be applicable to those investment funds qualifying for Hong Kong resident status.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Apr.10, 2015