Hong Kong Fashion & Luxury Brand Tax — Expert Advisory

Yes. Under s.20B of the IRO, royalties paid to non-resident persons for use of their intellectual property (trademarks, brand names, fashion designs) in Hong Kong are subject to withholding tax. The effective rate is typically 4.95% of the gross royalty amount (30% × 16.5%). The HK company paying the royalty must withhold and remit this to the IRD. Failure to withhold makes the payer liable for the tax.

Inventory must be valued at the lower of cost or net realisable value (NRV). For fashion items that are discounted at end-of-season, the NRV (estimated selling price less selling costs) should be used if it is lower than original cost. Write-downs to NRV are deductible in the period they are recognised, provided they are supported by evidence of actual selling prices, discount events, or specific product obsolescence. A systematic seasonal review process with documentation is essential.

Samples provided for genuine marketing and sales purposes (press lookbooks, buyer samples, trade show samples) are deductible marketing expenses. They are not inventory in the traditional sense — they are marketing costs that generate sales. Keep documentation of the purpose of samples, the recipients, and the business rationale. Very high-value luxury samples that are returned (loaned) are not expenses — they remain as assets.

Payments to HK-resident celebrities are straightforward — they are assessable as income to the celebrity and deductible to the brand. Payments to non-resident celebrities performing endorsement activities in HK are subject to HK salaries tax or s.20B profits tax. The payer (brand) must withhold and remit under s.20A/20B. Under DIPN 23, non-resident entertainers/sportsmen performing in HK are subject to tax here.

Yes. Fashion show costs, pop-up event expenses, launch event production, and trade show participation costs are deductible marketing and promotional expenses under s.16(1) IRO. Costs include venue hire, production, catering, decoration, and invited guest costs directly related to the promotional purpose. Personal entertainment costs for directors and their associates without clear business purpose are not deductible under s.17(1)(b).