Detailed interpretation: Hong Kong licensed companies can open new accounts for mainland investors — is it mercy or a long-term imprisonment!

Today, I saw a new supplementary statement released by the Hong Kong Securities and Futures Commission, which emphasized that Hong Kong licensed companies can continue to open new accounts for mainland investors holding a mainland ID card or Chinese passport as identification documents, but must complete all account opening requirements.

At the same time, Hong Kong licensed companies can continue to serve existing mainland clients, provided that the service is not provided within mainland China and complies with the legal regulatory requirements of Hong Kong and applicable jurisdictions.

The Hong Kong Securities and Futures Commission’s Appendix B clearly states that "mainland investors" refer to individual investors who use a mainland resident ID card and/or Chinese passport as identification documents at the time of account opening as recorded in the licensed corporation’s records. This additional measure applies to mainland investors opening new investment accounts from the date the circular is issued.

The most critical point is that mainland investors must submit a written declaration at the time of account opening, confirming that all funds used for investment activities and related settlements come from legal sources outside of mainland China, and also confirm that they have not had their accounts closed or suspended by other licensed corporations or banks due to the use of suspicious or forged documents.

Although it seems possible to continue opening accounts for mainland investors, in reality, there are still the following impacts:

1. Access to APP channels for investing in Hong Kong or US stocks will become increasingly difficult.

Although domestic investors can still use Hong Kong compliant brokerage APPs, the mode of opening accounts, depositing funds, and receiving customer service guidance through the APP has become very difficult.

2. Even personal visits to Hong Kong for account opening will have high thresholds.

They will be required to explain the source of funds, location of funds, tax status, residence, bank account ownership, and whether they have been closed or had their accounts suspended. Reviews will take longer, and the probability of rejection will increase.

3. The difficulty for Hong Kong brokers to provide remote services to mainland clients is rising.

The key issue is whether the service is considered to be provided within mainland China, and whether it involves domestic marketing, account opening, receipt of trading instructions, fund transfers, and other activities. The mainland notification has strict regulations on these aspects.

Therefore, essentially, for ordinary Chinese investors, wanting to open an account with a Hong Kong bank or brokerage to engage in overseas stock trading is no easier than before. Even if Hong Kong brokers can still serve Chinese clients, the main focus here is on "Chinese" clients with foreign income.

But it should be noted that there is a clever and unspoken point: if your funds are from foreign income but you have not paid tax, then what does it mean to enter a Hong Kong brokerage?

If your money indeed comes from foreign income but this income itself has not been tax-reported, then entering a Hong Kong brokerage account becomes a “trap,” because brokers and banks will not only ask "where is the money now," but also "where did the money come from originally." Salary, company dividends, investment income, asset sales, overseas business income, all must be clearly explained regarding their sources, and if necessary, you must provide bank statements, contracts, tax forms, or audit documents.

Moreover, for cryptocurrency users, this is "adding trouble upon trouble." Where did your funds come from, how do you explain the source, have you paid taxes? You say you earned it by trading coins? That's fine, but where did the initial capital come from? Also from trading coins? That's fine too, but you need to provide complete trading records. Have you paid taxes? What, you say there is no cryptocurrency tax law? So, did you file personal income tax?

Don't argue!! I know what you want to say, let me answer you directly!

The State Administration of Taxation clarified in a 2008 reply regarding “individuals obtaining income from buying and selling virtual currencies online,” stating that individuals acquiring virtual currencies from players online and selling them at a markup generates taxable personal income, which should be taxed as "income from property transfer."

If you cannot provide proof of original value, the competent tax authority will determine the original value of the property. This document refers to the online virtual currencies of that year, which although cannot be simply equated to today's $BTC or $ETH, the tax logic remains the same, and China's categorization of cryptocurrency is as virtual currency.

In simpler terms, in China, Bitcoin and Q Coins share the same tax attributes.

Many friends used to think that as long as the money leaves mainland China, enters a Hong Kong bank, and then enters a Hong Kong brokerage, it completes the "overseas transfer." This understanding is becoming increasingly dangerous. Just because the funds arrive in Hong Kong does not mean the source is laundered; having an account in Hong Kong does not mean past funding paths do not need to be explained, and converting assets into stocks does not mean that previous cryptocurrency income automatically becomes compliant income.

What’s more troubling is that if the amount of money is small, it's manageable, but if it is large, what will you do if Hong Kong catches on to you!

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