Daily Tax Update - November 19, 2014: Shanghai-Hong Kong Stock Connect Launches, Tax Regime Announced

Shanghai-Hong Kong Stock Connect Launches, Tax Regime Announced:  The Shanghai-Hong Kong Stock Connect (Stock Connect), a cross-border stock trading pilot program, launched this week.  Stock Connect links the Shanghai Stock Exchange (SSE) with Hong Kong Exchanges and Clearing Ltd. (HKEx).  Almost 600 companies traded on the SSE and nearly 300 companies trading on the HKEx have been approved for the pilot program.  Going forward, it is expected that regulators will consider expanding the list of eligible companies and relaxing trading quotas.

Stock Connect must consider the different tax rules applied in Hong Kong and mainland China.  Regulators from mainland China issued guidance to address these issues.  This guidance sets forth policies with respect to income tax (for mainland Chinese corporate investors, mainland Chinese individual investors, mainland Chinese securities investment funds, and Hong Kong investors); business tax; and stamp duty.  Matters that are not addressed by this guidance will be determined according to existing tax rules in Hong Kong and mainland China. 

More information about Stock Connect and the tax guidance can be found here.

PCAOB Reported to be Reviewing Conflicts for Accountants Serving Client as Both Return Preparer and Auditor:  The Wall Street Journal reported that the Public Company Accounting Oversight Board (PCAOB) is reviewing whether an accounting firm’s provision of tax advice and service as auditor for the same client could affect the auditor’s independence.

Reps. Ryan, Chaffetz, Named New Committee Chairs:  Rep. Paul Ryan (R-WI) was chosen by the House Republican Steering Committee to serve as chair of the House Ways and Means Committee for the term beginning in January 2015.  He succeeds retiring Chairman Dave Camp (R-MI).  Rep. Jason Chaffetz (R-UT) was selected to chair the Oversight and Government Reform Committee.  He succeeds Rep. Darrell Issa (R-CA), who cannot continue to serve as chair because of term-limits.