Did you know that trading the same company’s shares in Hong Kong versus Mainland China can result in dramatically different transaction costs? For investors navigating the complex world of dual-listed securities, understanding the stamp duty implications is crucial for accurate cost calculation and strategic investment planning. Both Hong Kong and Mainland China have implemented significant rate reductions in 2023 to enhance market competitiveness, but their stamp duty regimes differ substantially in structure, rates, and application. This comprehensive guide breaks down everything you need to know about stamp duty for dual-listed companies, comparing the Hong Kong and Mainland China regimes, examining A-shares and H-shares treatment, and explaining the tax implications for Stock Connect transactions.

Current Stamp Duty Rates: Hong Kong vs Mainland China

Hong Kong Stamp Duty on Securities

Following the 2023 Policy Address, Hong Kong reduced its stamp duty rate on securities transactions from 0.13% to 0.1% per party, effective 17 November 2023. The Stamp Duty (Amendment) (Stock Transfers) Bill 2023 was passed by the Legislative Council on 15 November 2023, marking a significant move to enhance Hong Kong’s competitiveness as a financial hub.

Key characteristics of Hong Kong stamp duty:

• Rate: 0.1% each for buyer and seller (0.2% total per transaction)
• Basis: Calculated on the higher of the consideration amount or market value of shares
• Definition of Hong Kong stock: Stock where the transfer must be registered in Hong Kong SAR
• Payment: Both buyer and seller are liable
• Fixed duty: Plus HK$5 fixed duty per instrument

Mainland China Securities Transaction Stamp Duty

On 28 August 2023, China’s Ministry of Finance and State Taxation Administration halved the stamp duty on securities transactions from 0.1% to 0.05%, marking the first reduction since 2008. This strategic move was implemented to invigorate the capital market and boost investor confidence during challenging economic conditions.

Key characteristics of Mainland China stamp duty:

• Rate: 0.05% on the transaction amount
• Who pays: Seller only (unilateral collection since September 2008)
• Application: Applies to A-shares traded on Shanghai and Shenzhen stock exchanges
• Historical context: First reduction in 15 years; rate remained at 0.1% from 2008-2023
• Market impact: On the announcement date, the Shanghai Composite Index rose 2.3%

Comparative Analysis: Hong Kong vs Mainland China

Understanding Hong Kong Stock Definition

The application of Hong Kong stamp duty hinges on whether a security qualifies as “Hong Kong stock” under section 2 of the Stamp Duty Ordinance (Cap. 117). This definition is crucial for determining tax liability.

Hong Kong stock is defined as:

• Stock the transfer of which must be registered in Hong Kong SAR
• Includes shares in Hong Kong incorporated companies
• Includes shares in foreign companies that maintain a share register in Hong Kong
• Includes H-shares of Mainland companies listed on the Hong Kong Stock Exchange

Not considered Hong Kong stock:

• A-shares traded on Shanghai Stock Exchange (SSE) or Shenzhen Stock Exchange (SZSE)
• Shares registered outside Hong Kong, even if traded through Hong Kong intermediaries

Dual-Listed Companies: A+H Share Structure

Companies dual-listed in both Mainland China and Hong Kong (commonly referred to as “A+H” companies) issue two distinct classes of shares with different characteristics and tax treatments.

A-Shares (Mainland China Listed)

• Listed on Shanghai or Shenzhen Stock Exchange
• Denominated in Renminbi (RMB)
• Subject to Mainland China stamp duty: 0.05% seller-only
• Historically restricted to Mainland investors (now accessible via Stock Connect)

H-Shares (Hong Kong Listed)

• Listed on Hong Kong Stock Exchange
• Denominated in Hong Kong dollars (HKD)
• Subject to Hong Kong stamp duty: 0.1% buyer + 0.1% seller = 0.2% total
• Freely accessible to international and Hong Kong investors

Stamp Duty Treatment: Separate Application

For dual-listed companies, stamp duty applies separately based on which exchange the transaction occurs. This creates a significant cost differential that investors must consider.

Stock Connect: Cross-Border Trading Stamp Duty

The Shanghai-Hong Kong Stock Connect (launched 2014) and Shenzhen-Hong Kong Stock Connect (launched 2016) allow cross-border securities trading. Stamp duty treatment differs significantly for Northbound and Southbound trades.

Northbound Trades (Hong Kong/Overseas Investors Buying Mainland Stocks)

Hong Kong stamp duty: NOT applicable

• SSE and SZSE securities are not “Hong Kong stock” under the Stamp Duty Ordinance
• Transactions are not subject to Hong Kong stamp duty

Mainland China stamp duty: APPLICABLE

• Sellers pay 0.05% stamp duty to Mainland authorities
• Buyers are exempt (consistent with Mainland rules)
• Collected through the Stock Connect trading mechanism

Southbound Trades (Mainland Investors Buying Hong Kong Stocks)

Hong Kong stamp duty: APPLICABLE

• SEHK securities are “Hong Kong stock” under the Stamp Duty Ordinance
• Both buyer and seller pay 0.1% stamp duty (0.2% total)
• Collected through SEHK pursuant to the existing collection agreement with the Collector of Stamp Revenue

Stock Connect Stamp Duty Summary

Recent Regulatory Developments (2023-2025)

Hong Kong: Enhanced Market Competitiveness

November 2023: Stamp Duty Rate Reduction

• Rate reduced from 0.13% to 0.1% per party
• Returned to pre-August 2021 level
• Aimed at reducing transaction costs and improving market sentiment

December 2024: REITs and Options Market Makers Exemptions

• Legislative Council passed the Stamp Duty Legislation (Miscellaneous Amendments) Ordinance 2024 on 11 December 2024
• Exempted REIT share/unit transfers from stamp duty effective 21 December 2024
• Aligned Hong Kong with Mainland China, Japan, and Singapore where REITs are generally exempt
• Exempted options market makers’ jobbing business from stamp duty

Mainland China: Market Stimulus Measures

August 2023: Stamp Duty Cut

• Rate halved from 0.1% to 0.05% on 28 August 2023
• First reduction in 15 years (since 2008 global financial crisis)
• Part of broader stimulus package including IPO slowdown and reduced margin requirements

Practical Guidance for Investors

Cost Comparison Example: USD 1,000,000 Transaction

Strategic Considerations for Dual-Listed Investments

1. Exchange Selection Based on Stamp Duty: A-shares have significantly lower stamp duty cost (0.05% vs 0.2% total). However, institutional investors should model total transaction costs including stamp duty, brokerage, exchange fees, and FX costs.
2. Stock Connect Advantages: Northbound trades offer same stamp duty treatment as direct A-share trading. Southbound trades subject to Hong Kong stamp duty with no advantage over direct HKEX trading.
3. Round-Trip Transactions: For active trading strategies, Mainland A-shares offer 8x lower stamp duty cost (0.05% round-trip vs 0.4% for Hong Kong).
4. Long-Term Investors: For buy-and-hold strategies, one-time stamp duty cost is less significant. Focus on fundamental factors: corporate governance, dividend policy, and currency preference.

Exemptions and Special Cases

Hong Kong Stamp Duty Exemptions (partial list):

• Exchange-traded funds (ETFs) – exempted since 2015
• Real Estate Investment Trusts (REITs) – exempted since 21 December 2024
• Transfers between associated bodies corporate (subject to conditions)
• ETF market makers in allotment/redemption activities
• Dual-counter market makers for arbitrage and liquidity provision
• Stock borrowing and lending transactions (subject to conditions)
• Options market makers’ jobbing business (since December 2024)

Tax Planning and Compliance Considerations

Stamp Duty Collection Mechanisms

Hong Kong:

• Automatic collection through HKEX for exchange-traded transactions
• Collection agreement between SEHK and Collector of Stamp Revenue
• For non-trade transfers: parties must execute stamped contract notes within 2 business days
• Penalty for late stamping: up to 10x the duty plus potential criminal prosecution

Future Outlook and Policy Trends

Both jurisdictions continue to focus on enhancing market competitiveness through stamp duty reforms:

• Hong Kong’s 2023 reduction: Saves investors HKD 5 billion annually based on 2022 trading volumes
• Mainland’s 2023 halving: Reduced investor costs by approximately RMB 138 billion annually
• Cross-border integration: Stock Connect expansion continues with REIT inclusion (April 2024)
• Regulatory cooperation: Deepening collaboration between CSRC, SFC, and HKEX with fast-track approval channels