In this course · 4 of 9
Course 3
Profits tax for online sellers
9 lessons · 9 min
- 1Is there VAT or sales tax on online sales in Hong Kong?
- 2What profits tax rates apply to an online store in Hong Kong?
- 3How and when does an online seller file profits tax returns?
- 4Can a new online store carry forward its trading losses?
- 5Does server location decide whether e-commerce profits are taxed in Hong Kong?
- 6What evidence does the IRD want for an offshore profits claim for an online store in Hong Kong?
- 7Can a Hong Kong trading company claim offshore profits if it buys in mainland China?
- 8What penalties apply if an online seller files an incorrect or late profits tax return?
- 9How can a Hong Kong company get a tax residency certificate for Amazon or other platforms?
The short answer
Yes. In Hong Kong, a loss from a business chargeable to profits tax can be set off against that business's profits in later years, with no time limit (Inland Revenue Ordinance, section 19C). A loss does not give a refund, and the loss has to be reported properly in the return.
New online stores often make a loss early on because of stock purchases, advertising and set-up costs. Hong Kong profits tax lets a business carry a loss forward and set it against its future assessable profits. There is no cap on the number of years the loss can be carried forward, provided the same person still carries on the business.
Points to note:
- The loss is computed on tax rules, so it can differ from the accounting loss.
- Losses cannot normally be carried back to earlier years, and there is no cash refund.
- A loss from a business whose profits are sourced outside Hong Kong is not an allowable loss, because such profits are not chargeable.
- A company's losses may be restricted if the company is sold and the business changes in a way aimed at using the loss (an anti-avoidance provision).
Keep the computation each year so the carried-forward balance can be shown. Report the loss in the return even if no tax is payable.
Legal basis and sources
The law
- Inland Revenue Ordinance (Cap. 112), s.19C
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.
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