LCQ21: Tax policy relating to e-commerce

On 17 Jun 2026, Acting Secretary for Financial Services and the Treasury, Mr Joseph Chan, replied to Hon Andrew Fan regarding LCQ21 on tax policy relating to e-commerce. The Government maintains a simple and low tax system based on the territorial source principle, which means only taxes on business profits, property rental income, and employment income arising in or derived from Hong Kong are imposed. This policy applies to all business operation models, including physical and e-commerce businesses.

Consumer Expenditure and Retail Sales Statistics

According to the Household Expenditure Survey ("HES") conducted by the Census and Statistics Department in 2024/25, the average monthly household expenditure on online purchases was $1,467, an increase of 46.5 per cent compared with $1,002 in 2019/20. The average monthly household expenditures on online purchases by commodity/service section are: Food ($282 to $247), Meals out and takeaway food ($195 to $167), Basic food ($87 to $81), Alcoholic drinks and tobacco ($4 to $11), Clothing and footwear ($103 to $94), Durable goods ($176 to $198), Miscellaneous goods ($101 to $122), Transport ($171 to $451), Miscellaneous services ($164 to $340), and Others ($1 to $5). Local online retail sales in 2025 were provisionally estimated at $35.7 billion.

Inland Revenue Ordinance Compliance

The Inland Revenue Ordinance (Cap. 112) applies to all bricks-and-mortar and online businesses, including e-commerce. The Inland Revenue Department ("IRD") does not require taxpayers to declare their business operation model for tax assessment purposes. Consequently, the IRD does not maintain the breakdown of the amount of tax revenue from e-commerce and digital economy, and does not plan to require such declaration to avoid increasing compliance burden.

Business Registration and Inspection Data

Under the Business Registration Ordinance (Cap. 310) and the IRO, online and brick-and-mortar businesses are subject to the same legal obligations. During the three years from 2023/24 to 2025/26, the IRD conducted inspections under the BRO for 2,287, 1,598, and 1,475 cases respectively involving transactions carried out on the internet. Among these cases, 294, 265, and 240 cases were required to apply for business registration and pay the relevant business registration fees and levies after examination. For tax investigation under the IRO, the IRD does not maintain a breakdown by business operation model.

Profits Tax Principles and Fiscal Strategy

According to the IRO, profits tax shall be charged on every person carrying on a trade, profession or business in Hong Kong in respect of assessable profits arising in or derived from Hong Kong. This territorial source principle applies to companies incorporated in Hong Kong and those incorporated outside Hong Kong. Currently, the IRD does not maintain breakdown of the receipt of profits tax from cross-border e-commerce platforms. For details, the IRD updated its Departmental Interpretation and Practice Notes No. 39 (Revised) in March 2020. Hong Kong maintains a simple tax regime with low tax rates as a competitive advantage. When considering measures to increase revenue, the principle is to maintain this system, avoiding substantial increase in tax rates or introduction of new taxes as far as possible, while upholding the principles of "user pays" and "affordable users pay". The Government will make an overall assessment having regard to the financial position, economic environment, and immediate and long-term needs of society.