Hong Kong E-Commerce & Online Retail Tax — Expert Advisory

Potentially yes. Under Hong Kong's territorial source principle, profits from cross-border e-commerce may not be HK-source if the "operations giving rise to the profits" occur outside HK. If the goods are sourced and sold outside Hong Kong (even if the company is HK-registered), those profits may be offshore-sourced. However, if HK-based staff are making purchase decisions, managing supplier relationships, or fulfilling orders, the offshore claim will be weakened or eliminated. The structure of operations is critical.

Yes. Amazon FBA (Fulfilment by Amazon) fees, including fulfilment fees, storage fees, and referral commissions, are deductible business expenses under s.16(1) of the IRO as they are incurred in the production of assessable profits. The treatment is the same for Shopify, Lazada, and other marketplace fees. Advertising spend on these platforms is also deductible.

Inventory for e-commerce should be valued at the lower of cost or net realisable value (NRV). For dropshipping, where goods are not held in stock, there may be no inventory to value — the cost is recognised at the time of sale. For FBA businesses, the landed cost (product cost + shipping to Amazon warehouse + import duties) forms the inventory cost basis, not just the product purchase price.

Yes. Foreign exchange gains arising from e-commerce transactions (e.g., receiving USD, EUR, or GBP payment when your functional currency is HKD) are taxable if they are of a trading nature — i.e., they arise from the ordinary course of business operations. Capital FX gains (e.g., on long-term foreign currency deposits) are generally not taxable. Most e-commerce FX gains are trading in nature and should be included in assessable profits.

Hong Kong has no GST, VAT, or sales tax. HK businesses do not charge HK consumption tax on their sales. However, you may be required to collect VAT/GST in the destination country — the EU, UK, Australia, and many ASEAN countries now require non-resident sellers to register for and collect local VAT/GST on digital sales and goods delivered to their consumers. This is an overseas tax obligation, separate from your HK profits tax.