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After registering a Hong Kong company, do you have to pay tax for online trade?


In recent years, the number of companies registered in Hong Kong has maintained a high-speed growth trend. In the context of weak global economic recovery, the registration of Hong Kong companies has become an important way for many enterprises to seek breakthroughs. So after registering a Hong Kong company, is online trade subject to tax?

Registered Hong Kong company

An important factor in the popularity of Hong Kong companies is the excellent business environment in Hong Kong, of which the most notable is the tax system in Hong Kong. It is said that Hong Kong is one of the regions with the lowest taxes and tax rates in the world. Compared with the mainland, Hong Kong's tax system is indeed more popular with entrepreneurs.

There are three main tax systems in Hong Kong: Hong Kong profits tax, Hong Kong salaries tax and Hong Kong property tax. There is no value-added tax. It is worth mentioning that in addition to the advantages of less taxes and low tax rates, Hong Kong also applies the principle of taxation at the source. The hkird is only entitled to collect profits from Hong Kong. If the profits of a Hong Kong Limited company do not come from Hong Kong, they can apply to the Hong Kong Revenue Department for overseas profits, which is likely to be legally non taxable.

After the establishment of Hong Kong company, it is necessary to make an account for tax declaration. Then, does the online trade of Hong Kong company need to pay tax?

In view of the increasing frequency of e-commerce and trading activities through Internet, the problem of business location mainly depends on the location of the computer server where the transaction is conducted.

Guidance on interpretation and implementation of the Inland Revenue Ordinance No. 39 contains information in this regard. In the guidance, the Inland Revenue Department pointed out that it would study the situation of the relevant servers and examine the operation of other businesses in Hong Kong to determine the location of the business.

The Inland Revenue Department further indicates that if a company only has a computer server in Hong Kong (even if the server has the ability to enter into contracts, process payments or deliver digital products) and does not involve in the activities in Hong Kong, the company will generally be regarded as not carrying on business in Hong Kong, so the income derived therefrom will not be subject to Hong Kong profits tax.

This conclusion of the tax bureau also applies to servers owned, leased or provided by Internet service providers.

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