E-Commerce Taxation in Hong Kong

In July 2001, the Hong Kong Inland Revenue Department (“IRD”) issued Practice Note 39 dealing with the taxation of electronic commerce transactions. The new Practice Note states that a company's profits from e-commerce are not subject to tax, providing its business operations are located outside of the jurisdiction. This is the case regardless of whether or not the company's Internet service provider (ISP) is based in Hong Kong. The Inland Revenue also stated that companies that conduct their business operations within Hong Kong but employ an overseas ISP will be taxed.

The following questions have been addressed in this article:

How is the source of e-commerce profits determined?
How is e-commerce income characterized?

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