Nine out of ten sellers running their own online stores have had this thought:

“I registered a company in Hong Kong, and the money goes through PayPal and AirPay—it doesn’t go into a mainland account. I probably don’t have to pay taxes, right?”

“Our Hong Kong company has always filed zero-revenue tax returns—no one checks anyway, so we save wherever we can.”

“Offshore exemptions? That sounds complicated. Never mind, I’m not going to bother with it.”

Mr. Wang, a seller who runs an independent online store, used to think the same way.

His Hong Kong company had been registered for over half a year and had consistently filed zero-revenue tax returns. But business was slowly picking up—transactions through PayPal and AirPay had reached several hundred thousand, and he also had a mainland company operating in Shenzhen; funds for his independent e-commerce site were routed through personal accounts and his Hong Kong account.

It wasn’t until one day, when a friend told him about “cases where Hong Kong companies filed zero tax returns and were audited and required to pay back taxes,” that he began to feel anxious:“If I keep filing zero returns like this, will I end up getting flagged one day?”

The following content is based on real-life case studies of clients we have served; the data has been anonymized.

If you also own a Hong Kong company, are running an independent e-commerce site or engaged in cross-border e-commerce, have consistently filed zero tax returns but have actual revenue, and are unsure how to handle this in compliance with regulations, you can add us on WeChat and send us your basic information—Qicaiying will help you make a preliminary assessment.

WeChat: qcygscszk or call 18676749275

01 Mr. Wang's Situation(math.) genusYou may have experienced this, too

Mr. Wang’s situation isn’t complicated, but it’s quite typical:

• Hong Kong company: It was registered here, established in July or August, and hasn't reached the annual review deadline yet. It hasn't undergone an audit in its first year and has consistently filed zero-revenue returns.
• business model: Running an independent e-commerce site; there is a mainland Chinese company in Shenzhen
• Funds Flow: The Hong Kong company has transaction records from third-party accounts such as PayPal and AirCloud, with an estimated total of around 1 million.
• Funding Path: The independent website is not linked to a corporate account; funds are routed through personal accounts and Hong Kong accounts.
• Mainland companies: Also a zero return
• Key Demands: I don't want to keep filing zero returns and take on the risk, but I want to do so in compliance with the regulations—Want to pay less in taxes and control costs—Just starting out, so every penny counts

He had previously consulted several financial and tax firms, but the responses he received were either “just pay the back taxes” or “the fees are too high to discuss in detail,” so he never made up his mind to address the issue.

It wasn't until a friend recommended him that he found us.

02 Why didn't anyone do anything about it before?(math.) genusCan't do it now?

Many Hong Kong company owners feel that:“Since the Hong Kong company is based overseas and the cash flow is also overseas, how would the tax authorities know?”

That idea might have held true in the past, but it may not necessarily be the case now.

Previous environment:

There is no information exchange between the Hong Kong corporate tax system and the mainland tax system, so even if a Hong Kong company files zero tax returns for two or three years, no one will take any action. Revenue from independent e-commerce sites is processed through PayPal and AirPay, so the funds never enter the mainland, and the tax authorities cannot track them.

Current changes:

Change 1: Full implementation of the CRS information exchange. 

As a CRS participating jurisdiction, Hong Kong automatically exchanges financial account information with mainland Chinese tax authorities. Information regarding Hong Kong companies’ bank accounts and third-party payment accounts (such as PayPal and AirPay) is included in the scope of this exchange.

Change 2: Following the launch of the Golden Tax Phase IV system, data is cross-referenced across multiple dimensions. 

Even if your funds do not go directly into a domestic account, as long as your mainland company is conducting business operations (such as procurement, logistics, and staffing), the tax authorities can determine the true scale of your business by analyzing logistics data, procurement data, and employee social security information.

Change 3: The risks associated with filing zero-revenue tax returns for Hong Kong companies have been accumulating year by year. 

The Hong Kong Inland Revenue Department is conducting increasingly rigorous audits of companies filing “zero returns.” If a company is actually in operation but consistently files zero returns, it faces back taxes, fines, late payment penalties, and criminal liability should it be audited.

The result is: The days when “no one paid attention to zero-reporting” are long gone.

03 Sellers with Independent Websites and Hong Kong Companies(math.) genusThe 4 Most Common Pitfalls

Based on Mr. Wang’s situation, here are four common pitfalls you can check against:

Misconception #1: Thinking that “since the money flows through Hong Kong, you don’t have to pay taxes”

Many independent online store sellers believe that as long as the money goes into PayPal, AirPay, or a Hong Kong bank account—and has nothing to do with the mainland—they don’t have to pay taxes.

But the fact is: Hong Kong is practicingterritoriality principle—Taxes are levied only on “profits derived from Hong Kong.” If none of your business operations (purchasing, sales, logistics) are based in Hong Kong, and your profits are derived from outside Hong Kong,You can apply to the Hong Kong Inland Revenue Department for an offshore exemption to legally avoid paying Hong Kong profits tax.The

But ifDo not applyOffshore tax exemptions, coupled with a failure to report income—that is, filing a “zero return”—can result in tax back payments and fines at best, and criminal liability at worst, should an audit be conducted.

Pitfall #2: Confusing Hong Kong Accounting with Offshore Exemptions

Many sellers don't understand the difference between “bookkeeping,” “auditing,” “annual review,” and “offshore exemption,” and think they are all the same thing.

In a nutshell:

• annual audit: The “annual business license renewal” for Hong Kong companies must be completed every year.
• settle accounts: Organize the Hong Kong company's cash flow and documents into standardized ledgers
• audits: A “Financial Health Check Report” issued by a licensed accounting firm in Hong Kong”
• Offshore exemptions: Apply to the Hong Kong Inland Revenue Department to claim, “My profits are not derived from Hong Kong, so I am not required to pay profits tax.”

Account reconciliation is a prerequisite for offshore tax exemption. Without proper accounting records, an audit report cannot be issued, and an application for offshore tax exemption cannot be filed.

Pitfall 3: PayPal/AirCloudPay Transaction History “Goes Unmonitored”

Many sellers believe that PayPal and AirPay are third-party payment platforms that fall outside the scope of banking regulation and cannot be traced by the tax authorities.

But the fact is: As the CRS is gradually implemented, account information from non-bank financial institutions is also included in the reporting scope. Licensed payment institutions, such as AirCloudPay, are similarly subject to information-sharing obligations.

Pitfall 4: Mainland and Hong Kong Companies “Operate Independently”

In Mr. Wang’s case, the Hong Kong company filed a zero-report, and the mainland company also filed a zero-report; neither filed a return, assuming that “no one would find out.”

But actually: Your independent e-commerce site’s procurement, logistics, and operations team are all based in China—the tax authorities can cross-verify the true scale of your business from multiple perspectives, including supply chain data, logistics data, and personnel data.

04 After receiving the warning(math.) genusWe developed two proposals for our client.

After fully understanding Mr. Wang’s situation, we didn’t rush him to “pay back taxes” or “amend his tax return”; instead, we first helped him with one thing:Separately analyze his Hong Kong and mainland companies and propose solutions for each.

Module 1: Hong Kong Companies—Offshore Exemptions, Legal Exemption from Profits Tax

What General Manager Wang is most concerned about is:“Can Hong Kong companies avoid paying taxes? How exactly do you apply for an offshore tax exemption?”

We presented him with three lines of reasoning:

① Hong Kong follows a territorial tax system.

Hong Kong imposes taxes only on “profits derived from Hong Kong.” If your business activities (customers, procurement, logistics, and personnel) are not based in Hong Kong and your profits are derived from outside Hong Kong, you may apply for an offshore exemption,Legally Avoiding Hong Kong Profits TaxThe

② Offshore exemptions are not “automatically granted”; they must be applied for.

Many sellers assume that the offshore exemption is “automatic” and that filing a zero-declaration return is equivalent to receiving the exemption. This isCompletely wrongunderstanding.

Offshore exemptions must be filed with the Hong Kong Inland Revenue DepartmentVoluntary Application... Submit the audit report and supporting documentation for business operations, which will be reviewed and approved by the tax authority. If no application is filed, taxes will be assessed at the standard rate by default—a zero return is considered a “failure to file a required return.”

③ To apply for an offshore exemption, you must maintain proper accounting records and obtain an unqualified audit report.

An audit report is the “key” to obtaining an offshore tax exemption. If your books are in disarray or your documentation is incomplete, the auditor will be unable to issue an “unqualified audit report,” and your application for an offshore tax exemption will almost certainly be denied.

Our Hong Kong Proposal for Mr. Wang:

There are only three things Mr. Wang needs to do:

1. Export transaction history from third-party accounts in Hong Kong (PayPal/AirPay)
2. Provide business contracts and logistics documents
3. We will handle all other bookkeeping, auditing, and application-related tasks.

Module 2: Mainland Companies—Gradually Achieving Compliance in Tax Filing and Keeping Taxes Within an Acceptable Range

Another concern Mr. Wang has is:“Mainland companies are also filing zero tax returns. What happens if they get caught? Is there a way to pay less in taxes?”

We have three proposals:

① Gradually bring tax filings into compliance; do not require a “one-time, full back-payment of taxes.”

Many firms immediately require clients to “report all past income in a single lump sum”—resulting in massive back taxes that clients simply cannot afford.

Our approach is as follows: We gradually increase the reporting ratio—from 50% compliance to 70% compliance to 80% compliance—so as to avoid triggering tax authority alerts while keeping the tax burden within the client’s acceptable range.

② A “two-pronged approach” combining tax credits from invoices and loss carryforwards.

• advertising cost: You don't need to issue a RMB invoice with a 7% tax rate; a mainland-style pro forma invoice is sufficient for tax deduction purposes.
• logistics costs: Ask the other party to issue an invoice for shipping fees paid from a personal account, and have the company reimburse the individual.
• Procurement without tickets: Keeping records—while not as effective as tax credits from invoices—is better than nothing.
• Loss Carryforward: The client's mainland company reported a loss of over 60,000 last year; this loss can be directly offset against this year's revenue.

③ Transferring funds from a personal account to a business account: Calculate the amount retroactively; there is no need to transfer the “full amount.”

Based on the client’s revenue and deductible expenses, calculate the amount that needs to be transferred to the company account (for example, if first-quarter revenue is 350,000 and deductible expenses are 230,000, only a small amount needs to be transferred to the company account). When making the transfer, simply include “Receipt” in the memo field.

Core logic: It’s not a question of “whether to pay taxes,” but rather “how to pay them and how much to pay.” It’s far better to comply with the law in a planned and systematic manner than to be forced to pay back taxes after an audit.

05 Why Do Customers Choose Our Services?

The reason Mr. Wang went from “Let me think it over” to “Let’s go ahead with it” was mainly because we ran the numbers for him:

If we do nothing:

If a Hong Kong company consistently files zero-revenue tax returns and is audited:

• Back-payable capital gains tax: 1 million in turnover × 8.251 TP3T/16.51 TP3T = 82,500–165,000
• Fines + Late Payment Penalties: May Double
• Mainland companies that file zero tax returns also face the risk of having to pay back taxes
• Total Risk Exposure:It could exceed 300,000

If you opt for an offshore exemption plus compliance filing:

Hong Kong Bookkeeping + Offshore Exemption + Mainland Compliance Planning, Package Price24,600 yuan

Money saved:

• Hong Kong Profits Tax: Save at Least82,500(Based on 1 million in turnover)
• Mainland Taxes and Fees: Kept within expected limits; will not result in substantial back taxes or penalties
• Overall Input-Output Ratio:Spend 20,000 and save at least 100,000+

More importantly—From now on, you won't have to worry about “when you'll be audited” anymore.

06 If you're also a seller with an independent website and a Hong Kong-based company

You can compare these few things.

• Since your Hong Kong company was incorporated, have you been filing annual returns as required? Or have you been filing zero returns for a long time?
• Do Hong Kong companies have transaction records for third-party accounts (such as PayPal, AirCloud, etc.)? Have these transaction records been reported?
• Are you familiar with offshore exemptions? Do you know how to apply for them?
• Are mainland companies filing their tax returns normally? Or are they also filing zero returns?
• Are there valid invoices and records for the procurement, logistics, and personnel costs associated with the independent website?

If any of the above applies to you, we recommend that you do one thing first:

Take your Hong Kong company'sAccount statements, business documents, audit reportsTake a moment to review the situation. If you’ve never done this before, you may not know exactly what your company’s risk profile is.

07 What can Qi Cai Ying do for you?

For Hong Kong company owners and cross-border e-commerce/independent online store sellers, Qicaiying offers:

• Hong Kong Accounting:Organize third-party payment platform and bank account transaction records into standardized ledgers
• Unqualified Audit Opinion:Issued by a licensed accounting firm in Hong Kong; the basis for an offshore exemption application
• Offshore Exemption Application:Apply to the Hong Kong Inland Revenue Department to legally obtain an exemption from Hong Kong profits tax
• Hong Kong Annual Filing/Secretarial Services:Fulfill the statutory annual compliance obligations for Hong Kong companies
• Compliance Filings for Mainland Companies:Gradual compliance, tax credits for invoices, and loss carryforwards to keep the tax burden within an acceptable range
• One-Stop Connectivity Between Hong Kong and Mainland China:No need to coordinate with multiple parties—one person handles the entire process

Who is this for?

• Independent online store/cross-border e-commerce sellers who have registered a Hong Kong company but have consistently filed zero tax returns—Worried about being investigated, not sure how to handle it
• Sellers with Hong Kong-based companies that have transaction histories from third-party accounts such as PayPal and AirPay—I want to apply for an offshore exemption but don't know how to go about it
• Sellers who want to comply with regulations but are concerned about high costs—To learn about the actual costs and the return on investment
• Sellers whose Hong Kong and mainland companies operate independently and who don’t know how to integrate them—To establish a compliance framework and put an end to the constant anxiety

If you also own a Hong Kong company, are running an independent e-commerce site or engaged in cross-border e-commerce, have consistently filed zero tax returns but have actual revenue, and are unsure how to handle this in compliance with regulations, you can add us on WeChat and send us your basic information—Qicaiying will help you make a preliminary assessment.

WeChat: qcygscszk or call 18676749275

Enterprise Finance Group

Founded in 2015 and headquartered in Shenzhen, Qicaiying Group is a leading provider of corporate services and tax compliance solutions in China.

The Group is deeply committed to providing services across the entire corporate lifecycle. Its core business areas include: business registration, bookkeeping services, tax compliance, overseas company registration (Hong Kong, the U.S., Singapore, Mexico, etc.), cross-border structuring, outbound direct investment (ODI) filing, overseas tax planning, bank account opening assistance, and identity planning.

Over the past decade, Qicaiying has served more than 10,000 corporate clients and has accumulated solid practical experience in key areas such as corporate structuring in Hong Kong and overseas, cross-border tax and financial compliance, and corporate accounting management. The Group boasts a team of seasoned financial and tax advisors who closely monitor changes in domestic and international tax systems and regulatory trends, providing clients with one-stop solutions ranging from structural planning to implementation.

statement denying or limiting responsibility

The content of this article is based on actual service cases; client information has been anonymized. This article is intended to provide general information on finance and taxation and to highlight compliance risks; it does not constitute any tax, legal, or financial advice. The outcome of an offshore exemption application is subject to the final determination of the Hong Kong Inland Revenue Department. If readers face specific tax issues, they should consult a qualified tax professional or the competent tax authority. Qicaiying assumes no legal liability for any losses arising from reliance on the content of this article.