Shanghai Connect and Shenzhen Connect are securities trading and clearing links programmes aiming to achieve a mutual market access between the Mainland and Hong Kong.
Under Shanghai Connect and Shenzhen Connect, the Stock Exchange of Hong Kong Ltd (“SEHK”) has established a mutual order-routing connectivity and related technical infrastructure with the Shanghai Stock Exchange (“SSE”) and the Shenzhen Stock Exchange (“SZSE”) to enable (a) the Hong Kong and overseas investors to trade (“Northbound Trades”) in the designated securities listed on SSE or SZSE (“SSE Securities” and “SZSE Securities” respectively), and (b) the Mainland investors to trade (“Southbound Trades”) in the designated securities listed on SEHK (“SEHK Securities”). Hong Kong Securities Clearing Co Ltd (“HKSCC”) and China Securities Depository and Clearing Corporation Ltd (“ChinaClear”) will be responsible for the clearing, settlement and the provision of depository, nominee and other related services of the trades executed by their respective market participants and investors.
For details, please refer to the website of Hong Kong Exchanges and Clearing Ltd:
Yes. As the Mainland investors through the Southbound Trades deal with SEHK Securities, which are Hong Kong stocks as defined under section 2 of the Stamp Duty Ordinance (Cap 117) (“SDO”), the trades will be subject to stamp duty in Hong Kong.
No. Hong Kong and overseas investors through the Northbound Trades deal with SSE Securities and SZSE Securities, which are not Hong Kong stocks as defined under section 2 of the SDO, the trades will not be subject to stamp duty in Hong Kong.
For the Mainland tax implications of the Northbound Trades, please refer to the announcement of the relevant taxation policy jointly issued by the Ministry of Finance, the State Administration of Taxation and China Securities Regulatory Commission (Chinese version only):
Non-trade transfers of SEHK Securities, SSE Securities and SZSE Securities are generally allowed in the following circumstances:
(c) the dissolution, liquidation or winding-up of any company or corporation;
(d) donation to a charitable foundation;
(e) assistance in enforcing proceedings or action taken by any court, prosecutor or law enforcement agency; and
(f) any other transfers which may be permitted by the competent authorities (for SEHK Securities) or SSE and SZSE (for SSE Securities and SZSE Securities).
Unless specifically exempted under the SDO, any non-trade transfer of SEHK Securities in the Mainland will be deemed to be a sale and purchase of the relevant securities under section 19(1E)(a) of the SDO. The Mainland investors in SEHK Securities will be required to execute contract notes and pay stamp duty for the relevant transfers in Hong Kong.
No. As SSE Securities and SZSE Securities are not Hong Kong stocks, any non-trade transfers of them in Hong Kong will not be subject to stamp duty in Hong Kong.
For sale and purchase transactions, stamp duty on the Southbound Trades conducted in SEHK will be collected through SEHK pursuant to the existing collection agreement between the Collector of Stamp Revenue (“the Collector”) and SEHK. As regards the non-trade transfers of SEHK Securities in the Mainland, HKSCC and ChinaClear will assist the Mainland investors to pay stamp duty to the Collector. For details of the arrangement, please refer to the guidelines issued by ChinaClear in respect of the clearing and depository for SEHK Securities (Chinese version only) :