Hong Kong Treasury Bureau's Hui Cheng-yu: Propose to exempt stamp duty on property transactions entrusted to funds.

On November 20th, the Secretary for Financial Services and the Treasury of Hong Kong, Christopher Hui, moved the second reading of the Stamp Duty Bill (Miscellaneous Amendments) 2024 in the Legislative Council meeting. He proposed to exempt stamp duty on the sale and purchase of Real Estate Investment Trusts (REITs) to enhance the competitiveness of Hong Kong's REIT market, support further market development, and attract more investors. This stamp duty proposal, along with the China Securities Regulatory Commission's announcement in April this year to include REITs in the Shanghai-Hong Kong Stock Connect scheme, will significantly increase the liquidity and attractiveness of Hong Kong's REIT market, expand the investor base, and strongly support the development of Hong Kong's REIT market. The following is the full speech of the Secretary for Financial Services and the Treasury, Christopher Hui, at the Legislative Council meeting today (November 20) on the second reading of the Stamp Duty Bill (Miscellaneous Amendments) 2024: Chairman, I move the second reading of the Stamp Duty Bill (Miscellaneous Amendments) 2024 (the Bill). The purpose of the Bill is to implement measures proposed in the 2024-2025 Budget to exempt stamp duty on the transfer of shares or units of Real Estate Investment Trusts (REITs) and on dealer's securities business involving options; and to revise the stamp duty collection arrangements under the paperless securities market system in Hong Kong. Promoting the development of the REIT market has always been our goal. Since the launch of the first REIT in Hong Kong in 2005, the REIT market in Hong Kong has seen significant growth and is gradually establishing its foundation. Currently, under the Stamp Duty Ordinance, stamp duty is payable on the sale and purchase of REITs at a rate of 0.1% for each party. Looking at major REIT markets in the region, including Mainland China, Japan, and Singapore, stamp duty is generally not payable on the sale and purchase of REITs. To enhance the competitiveness of Hong Kong's REITs, and to support further market development, we propose to exempt stamp duty on the sale and purchase of REITs. This stamp duty proposal, in conjunction with the China Securities Regulatory Commission's announcement in April this year to include REITs in the Shanghai-Hong Kong Stock Connect scheme, will significantly increase the liquidity and attractiveness of Hong Kong's REITs, expand the investor base, and strongly support the development of Hong Kong's REIT market. Regarding dealer's securities business involving options, the Stock Exchange of Hong Kong (Hong Kong Exchanges and Clearing Limited) 's options dealers plan to provide bid and ask prices to the market for investors to trade, in order to enhance the efficiency and liquidity of the options market. With the continuous development of products in the Hong Kong securities market in recent years, investment strategies have become more diversified, and trading patterns have changed. Option trading volume has significantly increased, leading to a higher demand for options dealer services. Currently, under the Stamp Duty Ordinance, any person engaged in dealer's securities business is required to prepare transaction documents, and a stamp duty of HK$5 is charged for each transaction document when stamped, which is a fixed cost for options dealers. Currently, apart from options dealers, market makers of other products are not required to pay related taxes. Exempting the stamp duty required for dealer's securities business involving options will enhance the efficiency of the options market, further facilitate investors, reduce the costs for options dealers, and align with the arrangements for other market makers. We also propose to correspondingly exempt the requirements for preparing transaction documents and stamping for relevant businesses. Implementing the paperless securities market system is one of the measures to enhance the financial infrastructure of Hong Kong. The purpose of the system is to allow investors to hold and transfer legal ownership of securities in a digital environment by eliminating the current paper-based transfer arrangements, thereby enhancing market efficiency and improving investor protection and transparency. The Legislative Council passed the Securities and Futures and Companies (Amendment) Ordinance 2021 in June 2021, establishing the legislative framework for the paperless securities market system. Among other things, the Amendment Ordinance specifies a new electronic stamping method. The Securities and Futures Commission subsequently discussed with market participants and the Inland Revenue Department for further discussion on the actual operational procedures in order to provide simpler and more efficient procedures. We propose to optimize the relevant arrangements. Specifically, we propose to authorize securities registration institutions to use the electronic stamping arrangements under the Stamp Duty Ordinance to assist investors in completing stamping and paying stamp duties on the electronic platform of the Stamp Duty Department to facilitate the relevant processes. I urge members to pass the Bill to implement the exempting of stamp duty on the transfer of shares or units of REITs and dealer's securities business involving options, and the stamp duty collection arrangements under the paperless securities market system in Hong Kong as soon as possible. I hereby submit these remarks. Thank you, Chairman.