In this course · 3 of 6
Course 2
Set up your store's books
6 lessons · 6 min
- 1How long must an online seller keep business records in Hong Kong?
- 2How should an online seller record marketplace payouts versus gross sales in the books?
- 3Are platform fees, advertising and shipping costs deductible for profits tax?
- 4How do I record refunds, returns and chargebacks for an online store in Hong Kong?
- 5How do I value inventory and work out cost of goods sold for an online store?
- 6Do online businesses in Hong Kong need audited accounts, companies and sole proprietors?
The short answer
Generally yes. Under section 16 of the Inland Revenue Ordinance, Hong Kong profits tax allows expenses incurred in producing chargeable profits, if they are not of a capital nature and not private or domestic. Platform commissions, ads, shipping and packaging for the shop usually qualify when supported by records.
Section 16 of the Inland Revenue Ordinance allows a deduction for outgoings and expenses to the extent they are incurred in the production of profits chargeable to tax. Section 17 blocks deductions for domestic or private expenses and for capital items.
Typical online-store costs that normally fall within the general rule:
- marketplace commissions and payment-processing fees;
- advertising on social media and search platforms;
- courier, postage and packaging;
- website hosting, apps and software subscriptions;
- product photography and samples; and
- cost of goods sold.
Equipment such as computers or a packing machine is capital in nature, so no immediate deduction is allowed; instead, depreciation allowances may be available under the Ordinance. Mixed-use items, such as a phone used personally, need a fair business-use apportionment.
A sole proprietor's own pay or drawings are not deductible. Keep invoices for every expense, because the IRD can ask for support.
Legal basis and sources
The law
- Inland Revenue Ordinance (Cap. 112), ss.16, 17
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Was this lesson useful?
Upvote it and it moves up for the next reader who asks.
