Chartered Institute of Stockbrokers (CISI) Professional Practice Exam

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Study for the CISI Professional Exam. Prepare with flashcards and multiple choice questions, each question comes with hints and explanations. Ensure your success!

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What rate of stamp duty is applied to the purchase of foreign shares?

1% of the transaction value
3% of the transaction value
No stamp duty is paid
0.5% of the transaction value

The correct answer is: No stamp duty is paid

When purchasing foreign shares, there is no stamp duty applicable. This means that buyers are not required to pay any tax on the transaction value when they buy shares traded on foreign exchanges. This absence of stamp duty can encourage investment in foreign markets, as it reduces the overall cost of acquiring such shares compared to domestic transactions where stamp duty may be applicable. In contrast, the other options propose various rates of stamp duty that would apply to the transaction value, which does not align with current regulations regarding foreign share purchases. Each of these options suggests a tax implication that simply does not exist for foreign shares in many jurisdictions. This knowledge is essential for investors and financial professionals to effectively understand the cost structure associated with investing in shares listed outside their home country.