One of the key developments of 2014 was confirmation that Qualified Foreign Institutional Investors (QFIIs) and RQFIIs would be temporarily exempt from corporate income tax for the capital gains derived from transferring stocks and other equity investment in mainland China from November 2014. 

The joint announcement by China’s Ministry of Finance, State Administration of Taxation and China Securities Regulatory Commission was made just before the formal launch of the Shanghai-Hong Kong Stock Connect, so that foreign investors investing via either channel would have fair tax treatment. 

“We expect that Chinese regulators will further enhance the QFII/RQFII schemes by relaxing investor eligibility and providing more flexible account management,” says Andy Ng, head of HSBC Securities Services China. “We also anticipate that, in the next 6-12 months, more investors will look into market entry following the MSCI’s decision to include China A-share in its emerging markets index.”

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