Financial Services Tax News Flash

Jul 2017

Newly launched Northbound trading of Bond Connect calls for specific taxation regulation

The People’s Bank of China (PBOC) announced Provisional Measures for the Establishment of Mutual Access between the Bond Markets of Hong Kong and Mainland China (Provisional Measures) on 21 June 2017.  The Provisional Measures only apply to “Northbound Trading” – a trading link which enables foreign investors to trade in the China Interbank Bond Market with effect from 3 July 2017 through a market infrastructure linkage between the Mainland China and Hong Kong.  The Bond Connect has strengthened Hong Kong’s status as an international financial centre, and signalled China’s commitment to open up its financial markets.

Notwithstanding the Provisional Measures issued on 21 June 2017, the Ministry of Finance and the State Administration of Taxation in China have not issued specific taxation rules on the Bond Connect. In the absence of specific taxation rules on Bond Connect, foreign investors should make reference to the applicable tax treatments under the existing China domestic tax legislation.

 

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