Recent moves (最近的舉動) by mainland firms have left local investors confused about tax rules on H shares - shares of mainland firms listed (掛牌) on the Hong Kong bourse (股票交易所).
According to a cross-border treaty (條約), the tax rate on H-share dividends (股息) for Hong Kong residents is up to 10 percent. But local investors - previously immune (免於) from the pain of (note 2) seeing their dividends stripped of a tax - are now confused as mainland firms are deducting (減去) 20 percent from dividends before distribution.
A deal struck between the mainland and Hong Kong in August 2006 stipulates that the tax on dividends due to Hong Kong H-share investors should not exceed 10 percent. Moreover, if a Hong Kong company has a stake of (note 3) at least 25 percent in a mainland firm, the tax should be no more than 5 percent of total dividends.
A source said the treaty for avoiding double taxation should keep the tax withheld under 10 percent. However, more mainland state- owned (國有的) firms are imposing a 20 percent tax on H-share dividends. The latest firms to do so are China Railway Construction (1186) and Zijin Mining Group (2899).
Earlier this month, Air China (0753) announced that holders of its H shares will no longer (note 4) be immune from personal income tax deductions. In 2008, China issued a circular on tax deductions by mainland firms before distributing H-share dividends to overseas non-resident (非本地居民) shareholders.
And, according to the mainland's personal income tax law, non-residents are required to pay taxes on dividends from shares in a mainland firm. The relevant tax rate on such income is 20 percent. Hong Kong Exchange and Clearing chief executive (總裁) Charles Li Xiaojia said the stock exchange is looking into (note 5) the matter to help clarify the situation and avoid investor confusion.
From good to better English:
(Note 1) in the dark=蒙在鼓裡，例句: I was in the dark about my supervisor’s plans to rewrite my job description. Dark=暗黑的。look on the dark side of things=看事物的黑暗面、悲觀。in a dark temper=不高興。
(note 2) the pain of=痛苦。No pains, no gains=不勞無獲。a pain in the neck=討厭或惹人生氣的人或工作。take pains=費盡苦心。
(note 3) has a stake of=佔有的股權。Stake=木樁。pull up stakes=離開。stake out=警方對嫌疑犯佈設監視。At stake=利害攸關。
(note 4) no longer=Not any more (不再)。例句: Victor no longer sings in a nightclub called Bravo Bravo.
(note 5) look into=Investigate (調查)。look after=照顧。look down on=看不起。look forward to =盼望。look on the bright side= 持樂觀態度。look up to=仰望。never look back= 不後悔
Victor’s View: It appears very clear to me that there exist two conflicting tax laws in China. One says non-resident investors are subject to a 20% dividend tax; but the other one stipulates that such investors’ tax burden shouldn’t exceed 10%. Well, I hope authorities will clear up the confusion soon.
(Victor Fung Keung, director of HK Baptist University’s M.A. in international journalism program, has published 3 books on English-enhancement and plans to write 7 more by the end of 2012. Write to him: deanfungenglish@gmail.com
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