Hong Kong Stock Borrowing and Lending Stamp Duty Exemption Process

Goals

To understand the process of obtaining exemption from paying Hong Kong stamp duty (tax) for Stock Borrowing and Lending, the documents that are required to be submitted, the forms that need to be completed, and the deadline for submission of these documents and forms.

Early Findings

Overview of the Process

  • The scope of obtaining exemption from paying stamp duty for stock borrowing and lending transactions in Hong Kong was covered under the Stamp Duty Ordinance (SDO), Cap. 117. This scope was extended by two amendments to the Stamp Duty Ordinance, dated 1994 and 1998, and the Revenue Ordinance 1999.
  • Section 19(1) of the SDO states that an individual that conducts a sale or purchase of Hong Kong stock will have to prepare and stamp a contract note. However, under the conditions of Section 19(11), stock borrowings and stock returns under a Stock Borrowing and Lending Agreement are not considered as transactions. Hence, no stamp duty is chargeable in such cases.

Documents, Forms, and Deadlines for Obtaining Exemption

  • The procedure to obtain stamp duty relief is covered under the website of the Inland Revenue Department under the subheading 'Stamp Duty Relief.'
  • An essential condition for obtaining exemption from paying stamp duty is that the Stock Borrowing and Lending Agreement has to be registered with the Collector.
  • Section 19(12A) of the SDO states that exemption from paying stamp duty on a stock borrowing and lending requires that the Borrower submit the following to the Collector.
  • The above mentioned documents, forms, and registration fees can be submitted by the Borrower to the Collector at any time after the execution of the Stock Borrowing and Lending Agreement but before 30 days expire from the date of the stock borrowing. No relief/exemption will be granted if the Stock Borrowing and Lending Agreement is not registered.
  • However, failure to register does not affect any subsequent stock borrowings. Future stock borrowings can qualify for exemption of stamp duty if the Stock Borrowing and Lending Agreement is registered within 30 days of the stock borrowing.
  • All failed stock borrowing transactions that cannot meet the requirements for exemption of stamp duty under Sections 19(12) and 19(12A) of SDO must be stated in the Return.

Summary of the Initial Findings

  • The initial hour of research uncovered the documents and forms that are to be submitted to obtain relief from paying stamp duty for stock borrowing and lending. In this regard, we found that registration of the Stock Borrowing and Lending Agreement is an essential step without which no relief can be obtained.

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