Cross-Border E-Commerce Enters a New Era - Does Hong Kong Still Offer a Low-Tax Advantage?
- TBA
- Jul 30
- 4 min read
On 6 June 2025, China’s State Administration of Taxation officially released the Administrative Measures for Tax-Related Information Reporting by Internet Platform Enterprise (STA Bulletin [2025] No. 15, ‘Bulletin 15’).
Dubbed by the industry as ‘China’s version of DAC7’, many observers have noted that this marks the start of a new era of full transparency and deeper regulation in the cross-border e-commerce sector.
The new regulations impose high-frequency, high-dimensional reporting obligations on platforms. They also introduce automatic identity and transaction data matching for sellers—signalling the end of the grey-area practices involving offshore platforms, offshore income, and missing declarations.
Given the situation, many have wondered – does Hong Kong still offer a low-tax advantage for businesses?
Summary of Key Provisions - Three Core Mechanisms Clarifying Platform Responsibilities and Reporting Obligations
1. No exemption for global platforms
Major cross-border e-commerce platforms—including Amazon, eBay, Temu, and TikTok Shop—are required to report tax-related data to the tax authorities, regardless of whether they are registered in China or overseas, as long as the transactions involve Chinese sellers or users.
2. Data regulation: identity and transactions
Platforms must report sellers’ identity details (including Unified Social Credit Code, identity documents, and contact details) and transaction data (such as gross sales, refunds, net income, and order volume) on a quarterly basis.
3. Three-tier responsibility tracing mechanism
Domestic platforms: Direct reporting by licensed entities
Overseas platforms: Must establish a domestic operating entity or appoint a local agent
Failure to report or false reporting: Fines between CNY 20,000 and CNY 500,000, with severe cases facing suspension or business rectification
In addition, a dynamic comparison and tax warning system has been launched. This ‘dual-matching mechanism’ compares platform-reported data against self-declared data from taxpayers.
If there is a significant discrepancy (e.g. platform income exceeding CNY 100,000 in a quarter but a zero-tax declaration), the system will automatically trigger a warning and initiate an audit.
Higher Compliance Thresholds - Hong Kong’s Low-Tax Advantage Remains
In recent years, registering a Hong Kong company has remained a popular choice for mainland Chinese businesses. Even as global tax compliance standards tighten, Hong Kong retains a central role in cross-border corporate structures due to its unique advantages.
1. Tax benefits: a simple system and low rates
As a globally recognised low-tax jurisdiction, Hong Kong continues to attract mainland enterprises in 2025 with its favourable tax structure:
Corporate Profits Tax is only 16.5%, with the first HKD 2 million of profit taxed at just 8.25%
No VAT, customs duties, or dividend tax
Offshore income may be exempt if it meets territorial source rules and substance requirements
Although Hong Kong has implemented the BEPS 2.0 global minimum tax regime from 2025—introducing a 15% minimum tax rate for multinational groups—small and medium-sized e-commerce businesses can still apply for exemptions through legitimate offshore operation and economic substance strategies.
2. Offshore tax exemption remains valid
Hong Kong’s tax regime is based on the territorial source principle, allowing tax exemptions for non-local income, provided the following conditions are met:
Suppliers and customers must both be non-Hong Kong residents
Contracts, warehousing, and deliveries must occur outside Hong Kong
No physical office, employees, or market activities in Hong Kong
Since 2019, the Hong Kong Inland Revenue Department has strengthened its review of economic substance. Applications lacking business evidence or relying on ‘paper-only’ offshore claims are likely to be rejected.
Moreover, Hong Kong companies are legally separate from mainland Chinese entities, and there are no actual business operation requirements, allowing companies to exist as shell entities. This brings two strategic benefits:
Tax-compliant structural planning
Flexible attribution of income and identity separation depending on business and tax considerations
Under the condition of regulatory compliance, using a Hong Kong company for signing contracts and receiving payments allows some separation from mainland identity, offering flexibility for asset planning and global reporting.
However, when applying for offshore exemption or preferential treatment under a double tax agreement (DTA), genuine business substance is essential—including premises, staff, and board records.
3. Flexible cross-border payment arrangements
Aside from tax benefits, Hong Kong also offers:
Multi-currency corporate bank accounts (e.g. HSBC, Bank of China, Standard Chartered) for receiving payments globally
Integration with mainland NRA accounts for two-way cross-border fund flows
No mandatory foreign exchange settlement and more flexible fund deployment
For cross-border sellers, Hong Kong companies can serve as a funding hub, centralising global payments and redistributing them globally or to mainland accounts through legitimate channels. Hong Kong has also signed double taxation agreements with 45 countries, enhancing strategic flexibility in fund mobility.
4. Government subsidies and R&D support
The Hong Kong SAR Government continues to enhance its support for SMEs.
In 2025, multiple subsidy schemes remain available for non-listed companies registered in Hong Kong:
BUD Fund: Supports expansion into mainland China or ASEAN, with a maximum of HKD 7 million per enterprise
Technology Voucher Programme (TVP): Subsidises IT system purchases, with a cap of HKD 600,000 per year
R&D Tax Deduction: First HKD 2 million of R&D expenditure receives a 300% deduction, effectively reducing taxable profits
Some advice from TB Accountants
As China’s cross-border e-commerce tax regime undergoes a full-scale reform, practices like private account collections and anonymous operations are no longer viable. Only by implementing multi-faceted strategies—such as substantive operations, sound tax planning, and structured identity separation—can businesses remain competitive in the evolving global tax landscape.
If you would like tailored advice on optimising your UK personal or corporate tax position, or structuring your cross-border e-commerce business, contact our expert team at TB Accountants. We also offer one-to-one Chinese-language support to help you find personalised solutions to suit your business needs.
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