The Ministry of Finance, the State Administration of Taxation and the China Securities Regulatory Commission announced on the 13th that individuals from the mainland would enjoy two-year tax exemption on the price difference of trading Hong Kong stock through Shanghai-Hongkong Stock Connection.
According to the Notification on Continuing Implementation of the Individual Income Tax Policy Related to the Mechanism of Shanghai-Hongkong Stock Market Interchange and Connection issued by the three departments, the individual investors from mainland will be temporarily exempted from individual tax on the income of transfer price difference derived from investing listed stocks of the Hong Kong Stock Exchange through Shanghai-Hongkong Stock Connection from November 17, 2017 to December 4, 2019.
Zhang Lianqi, managing partner of Ruihua Accounting Firm, believes that it’s the inevitable product of the development of capital market at the current stage that individual investors are exempted from individual income tax on domestic and overseas stock investments.
On November 17, 2014, "Shanghai-Hongkong Stock Connection", a trading and exchange mechanism between the Shanghai Stock Exchange and Hong Kong Stock Exchange, was officially launched. The Ministry of Finance, the State Administration of Taxation and the China Securities Regulatory Commission jointly issued a notification on November 14, 2014, that mainland individuals would enjoy three-year individual tax exemption on the income of transfer price difference derived from investing listed stocks of the Hong Kong Stock Exchange through Shanghai-Hongkong Stock Connection from November 17, 2014 to November 4, 2017. This time the notification, based on the last one, further extends the tax exemption policy by two years for mainland individuals trading Hong Kong stocks through the Shanghai-Hongkong Stock Connection.
Wen Laicheng, a professor of the Department of Finance and Taxation at the Central University of Finance and Economics, believes that it is conductive to encouraging individual investors to invest in the Hong Kong stock market and support Hong Kong's prosperity and development through temporary exemption of individual income tax. At the same time, it is also conducive to the further opening of China's capital market.