Date
19 August 2017
Chinese regulators have been asked to issue guidelines on a longstanding tax on A shares before the launch of cross-border stock trading. Photo: Bloomberg
Chinese regulators have been asked to issue guidelines on a longstanding tax on A shares before the launch of cross-border stock trading. Photo: Bloomberg

China urged to clarify A-share tax as cross-border trade looms

Chinese regulators are being asked to explain a longstanding 10 percent tax on A-share profits ahead of cross-border trading between the Hong Kong and Shanghai stock exchanges, the Hong Kong Economic Journal reported Thursday.

Ernst & Young is seeking clarification about the levy and its status.

Paul Ho, Ernst & Young financial services partner, said the current practice is that fund managers will set aside money for the tax from client accounts.

However, the money from the levy is idle, requiring detailed guidelines regarding tax collection issues, he said. 

No details about these issues have been released for investments under the US dollar-denominated qualified foreign institutional investor scheme or its renminbi-denominated equivalent.

Judy Vas, the firm’s regulatory leader for financial advisory services in Asia Pacific, said investors planning to take part in cross-border trading, dubbed Shanghai-Hong Kong Stock Connect, should also pay attention to other requirements.

These include a 30 percent cap on A-share holding for offshore investors as a proportion of their issued share capital and a six-month lock-up period for shareholders with a stake of more than 5 percent in a mainland-listed company.

Cross-border trading, which allows investors in Hong Kong and Shanghai to trade equities in each other’s market, is expected to start any time soon.

An announcement in April said trading would begin in “around six months”. Many market participants in Hong Kong expect trading to begin Oct. 27.

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