'No gains tax' for stock connect

Regulators may waive the capital gains tax on transactions through the Shanghai-Hong Kong Stock Connect program that is scheduled to begin on Nov 17, according to brokerages on the Chinese mainland and in Hong Kong.

The move, which is widely expected to be announced soon, will remove one issue for investors. Stockbrokers have said that the tax is confusing because it applies only under mainland rules. Hong Kong abolished the capital gains tax long ago.

"I heard that there will be a tax exemption period in the first six months after the launch of the program. Some people said that the tax holiday could last for as long as three years," a senior brokerage operator in Hong Kong said.

"We learned from the Shanghai Stock Exchange that a new tax arrangement will be announced soon, and the authorities will give more favorable treatment to Stock Connect investors compared with the Qualified Foreign Institutional Investors and renminbi QFII programs," the Shanghai-based National Business Daily reported, citing a source at Industrial Securities Co Ltd.

The authorities have never clarified the question of capital gains tax for the QFII and RQFII programs. The existing regulations imply that foreign equity investors should pay 10 percent, but the government has never collected any tax. However, international investors routinely make a 10 percent provision for such a contingency.

K.C. Chan, Hong Kong's secretary for financial services and treasury, said on Sunday that new tax rules will be announced "within a very short time". He was not available for comment on Wednesday.

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