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Newsletter | Articles Snippets from Hong Kong and China Read the latest news from Hong Kong and China. New IPO Safeguards to be Imposed In Hong Kong A new measure has been implemented to deter multiple applications for initial public offerings, the Hong Kong Monetary Authority has announced. The proposal took effect the beginning of this month. Before, part of the number of an identification document of an IPO applicant, or the first-named applicant of a joint IPO application, was printed on the IPO refund cheque for unsuccessful applications. In compliance with the requirements of the Personal Data (Privacy) Ordinance, the identity number is printed in such a way that the fifth and sixth digits are masked by an asterisk. Recently, some IPO applicants, in submitting multiple applications, have attempted to circumvent the existing arrangement for masking identity numbers in the refund cheques. Under the new measure, the position of the two masked digits will no longer be fixed at the fifth and sixth digits. The masked positions in each IPO will be randomly selected by a computer programme designed by the share registrar handling the IPO. It is designed to discourage dishonest people from attempting multiple applications in IPOs because they may encounter difficulties in depositing and encashing the refund cheques bearing an identity number which is different from their own. Chinese Firms Continue Flocking To Low-Tax Hong Kong In 2006, 282 Mainland companies invested in Hong Kong, injecting more than US$2 billion into the country’s economy, China’s Ministry of Commerce (MOFCOM) reported. According to InvestHK Mainland companies are attracted by Hong Kong’s international business environment, attractive tax rates and fund-raising capabilities. Currently, 368 Mainland–related companies are listed on the Hong Kong Stock Exchange Main Board and GEM markets. Last year alone, the mainland-related companies raised HK$384.9 billion, a 94 per cent increase on 2005. Chinese Government to Enforce Collection of Land Appreciation Tax The notice on questions concerning the settlement of land appreciation tax (LAT) over real estate development enterprises has led to a plunge in property stocks in Shanghai and Shenzhen. The notice, issued by the Chinese State Administration of Taxation (SAT), came into effect in February and has since triggered strong objections from developers. According to the SAT, the purpose of the notice is not to declare a new tax on property, but to enforce the collection of the tax that had been levied upon developers since 1994. The SAT believes LAT will not impose any additional tax burden on developers. In order to encourage investment in real estate, local governments around China have sold land-use rights at low prices and have not strictly implemented the LAT. The central government has now tripled its old land-use tax rate and doubled the land-use fees on new sites for construction. The land-use tax will apply equally to both local and foreign developers. But none of these adjustments has had the same impact as the LAT. LAT is payable when land and any buildings on the land, based on the realized gain, is transferred. Previously developers were permitted to pay a provisional amount of LAT in advance of the completion and financial settlement of the whole real estate project. In order to plug the existing loopholes, the notice says LAT must be paid based upon each separate development. A tax ratio, no lower than the current pre-tax ratio, will be determined and approved by the relevant taxation authority by reference to the rates of other local enterprises of similar business size and profitability. Securities Amendment to Boost Hong Kong's Exchange A new limit has been proposed for the Securities and Futures (Contracts Limits and Reportable Positions) 2007 rules in a bid to boost Hong Kong’s Exchange. According to the Securities and Futures Commission, the amendments will adjust the prescribed limits for H-shares index futures and options contracts to an aggregate delta limit of 12,000, applicable to all futures contract months and options series, instead of 6,000 per futures contract month or options contracts series. The new limit took effect in March. Commission Chief Executive Officer Martin Wheatley said: “The adjustment will help maintain Hong Kong’s leading position in the face of competition from the other exchanges which are keen to develop derivative products on Mainland related equities.” Mr Wheatley added the proposed amendment will better meet the market’s needs and will promote the growth of the futures and options markets. |