HK holders of H-shares to pay 10pc dividend tax

Hong Kong investors will have to pay a 10 per cent dividend tax on shares in the 300-plus mainland companies listed in the city under a new taxation regime brought in by Beijing.

Although the mainland has always taxed domestic investors 20 per cent of their dividends, it has until recently granted an exemption to Hong Kong shareholders. Hong Kong does not impose a dividend tax.

'It is going to be a pain as Hong Kong investors were not required to pay any dividend tax before,' said Kenny Lee, chief executive of brokerage firm First China Securities.

'Now they will need to count the tax as part of their investment costs when they invest in a mainland firm,' he added.

Since 2008, Hong Kong investors have been required to pay the 10 per cent dividend tax if they allowed their banks or brokers to hold the mainland stocks - known as H-shares - on their behalf. However, individual investors who held the shares in their own names did not need to pay any tax.

Local brokers lobbied for that exemption to continue but their attempts failed. In January, the State Administration of Taxation in Beijing put an end to the exemption, but did not specify how much the investors would have to pay.