In light of various court decisions, the Inland Revenue Department views on the locality of profits from trading in commodities or goods carried out by a Hong Kong business can be summarised as follows:

•	Where both the contract of purchase and contract of sale are effected in Hong Kong, the profits are fully taxable. “Effected” covers the negotiation, conclusion and execution of the terms of the contracts;
•	Where both the contract of purchase and contract of sale are effected outside Hong Kong, no part of the profits are taxable;
•	Where either the contract of purchase or contract of sale is effected in Hong Kong, the initial presumption will be that the profits will be fully taxable;
•	Where the sale is made to a Hong Kong customer, the contract of sale will usually be taken as having been effected in Hong Kong;
•	Where the commodities or goods are purchased from either a Hong Kong supplier or manufacturer, the purchase contract will usually be taken as having been effected in Hong Kong;
•	Where the effecting of the purchase and sale contracts does not require travel outside Hong Kong but is carried out in Hong Kong by telephone, fac, etc., the contracts will be considered as having been effected in Hong Kong;
•	Where an overseas company sets up a branch in Hong Kong to act simply as a buying office (i.e. the branch only purchases goods or of collecting information, and is not involved in their sale in Hong Kong or elsewhere), no profits tax liability will arise.

Source：Hong Kong Inland Revenue Department’s website

- https://www.ird.gov.hk/eng/pdf/dipn21.pdf