Is my Hong Kong company taxed on Amazon income

Is My Hong Kong Company Taxed on Amazon Income

Your Hong Kong company pays tax on Amazon income only if the profits arise in or are derived from Hong Kong. This depends on where you conclude sales contracts and perform business operations. Hong Kong uses the territorial source principle, so the Inland Revenue Department charges profits tax solely on Hong Kong-sourced profits. Income from Amazon sales sourced outside Hong Kong is not assessable, regardless of where the company is incorporated.

Hong Kong Company Taxed on Amazon Income: The Territorial Source Principle

Whether your Hong Kong company pays tax on Amazon income hinges on the territorial source principle. The Inland Revenue Department's Departmental Interpretation and Practice Note 21 (DIPN 21) explains how to determine profit locality. The key test is where the profit-generating operations occur, not where the customer lives or the company is registered. If those activities happen outside Hong Kong, the profits are offshore and not chargeable to profits tax.

Amazon FBA Hong Kong Tax

Using Amazon FBA (Fulfilment by Amazon) means your inventory sits in Amazon's overseas fulfilment centres. That location matters for your tax position. When goods are stored and shipped from an Amazon centre outside Hong Kong, the logistics and delivery operations occur outside Hong Kong. This supports an argument for offshore profits. You must also consider where your procurement, marketing, and contract management happen. If those activities are performed from Hong Kong, the Inland Revenue Department may treat part of your profit as onshore.

Hong Kong E-commerce Tax Amazon

For e-commerce businesses on Amazon, the Inland Revenue Department examines the entire activity chain. It looks at where you source products, negotiate and conclude supplier contracts, manage your Amazon Seller Central account, and handle customer service. Logging into Amazon Seller Central from Hong Kong to manage listings, pricing, and customer communications may lead the department to view contract conclusion as occurring in Hong Kong. That would make the profits on those sales assessable to profits tax.

Territorial Source Amazon Sales

To claim your Amazon sales are offshore, you must prove the profit-generating operations occur outside Hong Kong. The strongest case exists when:

• Your sales contracts are concluded outside Hong Kong, for example through an overseas agent or a server located outside Hong Kong.
• Your procurement and logistics are managed from outside Hong Kong.
• Your inventory is held in overseas fulfilment centres and you do not handle fulfilment from Hong Kong.
• Your marketing and customer service are conducted from outside Hong Kong.

If you manage your Amazon business entirely from Hong Kong, the Inland Revenue Department will likely treat the profits as onshore and chargeable. Keep detailed records of where each operational activity is performed; the department may request this information when reviewing your profits tax return.

If you are unsure about your tax position, consult a tax adviser familiar with DIPN 21 and the territorial source principle. The Inland Revenue Department does not accept offshore claims without supporting evidence, and the burden of proof is on the taxpayer.