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Stamp Duty FAQs Released On HK-China Fund Scheme

by Mary Swire, Lowtax.net, Hong Kong
01 February, 2016

Hong Kong's Inland Revenue Department has issued answers to frequently asked questions on the stamp duty implications of the Mutual Recognition of Funds between Mainland China and Hong Kong.

Since May last year, the China Securities Regulatory Commission (CSRC) and Hong Kong's Securities and Futures Commission (SFC) have allowed eligible funds to follow streamlined procedures to obtain authorization or approval to market to retail investors in each other's market. The initiative is intended to deepen financial cooperation between the Mainland and Hong Kong, and promote the joint development of their capital markets.

The guidance confirm that the sale or purchase in Hong Kong of units of a recognized Mainland fund under the MRF scheme is not subject to stamp duty in Hong Kong, as such units are not Hong Kong stocks. However, the sale or purchase in the Mainland of units of a recognized Hong Kong fund is subject to stamp duty in Hong Kong, since the transfer of units of a Hong Kong fund is required to be registered in Hong Kong, even though the transfer is effected in the Mainland.

However, stamp duty in Hong Kong is not payable on the allotment of units of a recognized Hong Kong fund, nor on the redemption of such units if they are subsequently extinguished or cancelled.

The guidance also addresses: the circumstances where investors will be required to pay stamp duty in Hong Kong in respect of non-trade transfers of units of a recognized Hong Kong fund; what are the stamping procedures for sale and purchase, or non-trade transfer, of units of a recognized Hong Kong fund; and what documents are required to be produced to ascertain the value of units of a recognized Hong Kong fund for stamp duty purposes.


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