Hong Kong Logistics & Warehousing Tax — Expert Advisory

The IRD applies the "operations test" to determine source — income is sourced where the profit-generating activities occur. For cross-border freight, a common approach is to apportion based on the proportion of the journey/service performed in HK vs overseas. For example, a HK-to-Shanghai shipment where the HK-side activities (booking, customs, port handling) represent 40% of the service may have 40% HK-source income. IRD Practice Note 21 provides guidance.

Yes. Commercial vehicles used in a trade or business qualify as plant & machinery for capital allowance purposes under the IRO. This includes trucks, vans, refrigerated vehicles, forklifts, and cargo-handling vehicles. The standard rates apply: 60% initial allowance in the year of acquisition, plus 30% annual allowance on the reducing balance. Private cars are specifically excluded from capital allowances.

Warehouse storage fees for goods stored in Hong Kong are HK-source income and fully taxable. Fees for storage of goods in transit may have an offshore element if the goods are not cleared through HK customs. Value-added warehousing services (labelling, kitting, quality control) performed in HK are HK-source income. The key is to document where each service activity actually occurs.

Yes. Customs brokerage fees for clearing goods through Hong Kong customs are HK-source income — the service is performed in HK — and are fully taxable as profits tax. This applies even if the goods are owned by overseas clients. Disbursements (duties, taxes paid on behalf of clients) are not income but should be correctly treated as pass-through items.

Yes. Warehouse lease payments (rent) are deductible business expenses. For logistics companies in Hong Kong's industrial areas (Kwai Chung, Tsuen Wan, Tuen Mun), warehouse rent is typically a major expense. Lease incentives (rent-free periods, landlord contributions) must be spread over the lease term. Fit-out costs qualify for capital allowances or s.16C renovation deductions.