In this course · 6 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
The Inland Revenue Department (IRD) asks what the profit-producing operations were and where they took place: who negotiated and concluded sales and purchases, where the key decisions and staff are, and where goods and services move. Under DIPN 21 (locality of profits) the seller must be able to show evidence.
An offshore claim means asking the IRD not to tax profits because they arose outside Hong Kong. The IRD's guidance (DIPN 21 on locality of profits and DIPN 39 for e-commerce) points to a factual enquiry, not a formula.
Typical questions in a review:
- Where were the contracts of purchase and sale negotiated, concluded and enforced?
- Where do the people who run the business work, and what do they do?
- Where are suppliers, warehouses and customers, and where is stock held?
- Who decides pricing, sourcing and marketing, and from where?
- How is the website operated, and by whom? Server location alone is not decisive.
- Where are bank accounts and payments handled?
The Privy Council has said that a taxpayer with a principal place of business in Hong Kong rarely earns profits that fall outside the tax charge, so a business run from Hong Kong faces a high bar. The tax return asks for offshore amounts to be identified, so claims are visible. Keep contracts, emails, travel records and a clear account of who did what, and where.
Legal basis and sources
The law
- Inland Revenue Ordinance (Cap. 112), s.14
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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