In this course · 2 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
Hong Kong profits tax is two-tiered, with the same rates published by the Inland Revenue Department (IRD) since the 2018/19 year of assessment. A company pays 8.25% on the first HK$2 million of assessable profits and 16.5% on the rest. A sole proprietorship or partnership pays 7.5% and 15%. Only one connected entity gets the lower tier.
The IRD publishes these rates for the two-tiered system, in use since the 2018/19 year of assessment:
| Business type | First HK$2,000,000 | Remainder |
|---|---|---|
| Corporation | 8.25% | 16.5% |
| Unincorporated business | 7.5% | 15% |
The lower tier is available to only one entity among connected entities, which must nominate it. The IRD page gives no end date for these rates.
Tax is charged on assessable profits, which means chargeable profits arising in or derived from Hong Kong, after allowable expenses and adjustments. Profits that have their source outside Hong Kong are outside the charge. Because of that, the amount of tax depends heavily on the source of profits for an online seller; see the answers on DIPN 39 and on offshore claims.
Worked example: a company with HK$3 million of assessable profits pays 8.25% on HK$2 million (HK$165,000) plus 16.5% on HK$1 million (HK$165,000), a total of HK$330,000.
There is no tax-free threshold for a business. Provisional tax is also normally payable for the year, so cash flow should allow for it.
Legal basis and sources
The law
- Inland Revenue Ordinance (Cap. 112), s.14, Schedule 8
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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