The exchange is currently negotiating the terms of the scheme which is expected to start in October 2014. The scheme will allow investors to trade Shanghai-listed shares via the Hong Kong stock exchange while mainland investors will be able to trade Hong Kong-listed shares via the Shanghai Stock Exchange.
Currently, China claims a 10% capital gains tax on all stock purchases made on the mainland. However, the tax has never been collected on shares purchased under a range of cross-border foreign investment programs, including the Qualified Foreign Institutional Investor (QFII) and the Renminbi Qualified Foreign Institutional Investor (RQFII) schemes.
Hong Kong does not impose capital gains tax on share purchases.Chinas tax regime for QFII and RQFII has been unspecified since the schemes were first introduced because its tax rules only recognise investors from countries with which Beijing has a tax agreement.
The exemption period requested by the HKEx would allow both regulators more time to enforce a uniform tax regime for all trading schemes.
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