The Shenzhen-Hong Kong Stock Connect allows Mainland Chinese and Hong Kong investors to trade stocks on each other’s market. 

Hong Kong investors will be temporarily exempt from tax on capital gains derived from the trading of PRC shares. Capital gains derived from the trading of Hong Kong shares by Mainland Chinese individual investors will be exempt from Individual Income Tax for three years.

Like the Shanghai programme, the Shenzhen-Hong Kong Stock Connect is a landmark in integrating and internationalizing the capital markets in Mainland China and Hong Kong.  The IIT exemption granted to Mainland investors under the Shenzhen programme will expire shortly before the end of 2019, while the IIT exemption under the Shanghai programme will expire by the end of 2017.

We expect that the Mainland China authorities will introduce tax rules before those dates to further clarify the tax issues arising under both Stock Connect programmes.