HONG KONG’S stock exchange has asked mainland regulators to give investors time to adjust to any tax rules agreed upon as part of a closely watched cross-market share trading program, sources briefed by the city’s stock market operator said Friday.

    Foreign investors are concerned that the new tax rules could come into force immediately after the program is launched, allowing them no time to make the necessary adjustments. There are also worries that the mainland authorities would apply any taxes retroactively.

    The Hong Kong Exchanges and Clearing Ltd. is currently negotiating the terms of the program, called Hong Kong Shanghai Stock Connect, with the China Securities Regulatory Commission, the mainland stock regulator. The program is likely to be launched in October.

    “Our communication to them is very clear that if and when the new tax rules become effective, we need an exemption period to implement those rules and the new rules shouldn’t be with retrospective effect,” one of the sources said.

    The program will allow investors to trade Shanghai-listed shares via the Hong Kong stock exchange, while mainland investors will be able to trade Hong Kong-listed shares via the Shanghai Stock Exchange.

    Currently, the mainland slaps a 10 percent capital gains tax on all stock purchases made on the mainland, but this tax has never been collected on shares purchased under a range of cross-market foreign investment programs, including the Qualified Foreign Institutional Investor and the Renminbi Qualified Foreign Institutional Investor programs. (SD-Agencies)