Struggling with VAT in Europe? How a Hong Kong Company Can Make Your E‑commerce Taxes (Much) Simpler

A Hong Kong company won’t eliminate your obligation to charge EU VAT, but it can streamline how you comply—centralizing corporate taxes in Hong Kong (no VAT/GST; simple, low profits tax) while you use EU simplifications like OSS/IOSS and marketplace “deemed supplier” rules to avoid 10+ separate VAT registrations. The practical result for Amazon and Shopify sellers is fewer filings, cleaner checkout, and more time to grow.

If you sell to consumers in Europe through Amazon or your own Shopify store, VAT can feel like a maze—27 countries, shifting thresholds, and acronyms that read like airport codes.

Since 2021, the European Union has tried to make that maze navigable with a single map: the VAT e‑commerce package. At the same time, Hong Kong has quietly remained one of the most administratively light places to run a company.

For cross‑border entrepreneurs, combining the two—an EU‑compliant VAT workflow with a Hong Kong operating company—can reduce friction without crossing lines. The key is understanding what Hong Kong can simplify (corporate taxation and back‑office overhead) and what it can’t (destination‑based VAT in Europe).

The rule you can’t dodge: destination VAT still applies

First, the non‑negotiable: VAT is a consumption tax due where your customer lives. If you sell a shirt to a consumer in France, French VAT is due—no matter where your company is incorporated. What changed on July 1, 2021, is the mechanism for collecting and remitting that VAT: the EU introduced the One‑Stop Shop (OSS) and Import One‑Stop Shop (IOSS) so cross‑border sellers could file in one portal instead of registering in every country they ship to. In parallel, the EU made online marketplaces a “deemed supplier” in many B2C scenarios, shifting the VAT burden off third‑party sellers for those particular transactions.

Why a Hong Kong company helps anyway

Hong Kong doesn’t levy VAT, GST or sales tax; corporate profits are taxed at 8.25% on the first HK$2 million of profits and 16.5% thereafter, and only on profits arising in or derived from Hong Kong under its territorial regime. There’s no monthly VAT return in Hong Kong draining your attention. You still owe EU VAT on EU consumer sales, but the work of VAT can be concentrated inside EU simplification schemes (OSS/IOSS) or handled by the marketplace, while your corporate tax life remains straightforward in Hong Kong.

Two common sales models—and the simplest VAT workflow for each

1) Your own site (Shopify), shipping from outside the EU

Best‑fit tool: IOSS for orders ≤ €150

If your basket value is €150 or less, the IOSS lets you charge the customer’s local VAT at checkout and file one monthly return through a single EU Member State (if you’re a non‑EU seller, you appoint an EU intermediary to use IOSS). When your parcel lands in the EU, customs sees the IOSS number in the electronic data and doesn’t collect import VAT again; you’ve already collected it and will remit it via the monthly IOSS return. You avoid surprise “pay VAT at the door” moments for customers and the cascade of failed deliveries that follows.

What about orders above €150 from your own site? IOSS doesn’t apply there. You can ship DDP (you or your broker pay import VAT and duties, often requiring a local VAT registration to recover import VAT), or rely on Special Arrangements in which the postal operator/courier collects VAT from the customer and pays the tax authority monthly—less smooth for customer experience, but operationally simple for the seller.

A final nuance: the oft‑quoted €10,000 “micro‑threshold” that keeps VAT in the seller’s country of establishment only applies if you are established in one EU Member State. Non‑EU sellers can’t rely on it; from the first sale to an EU consumer, you’re in destination VAT territory.

Bottom line for Shopify brands shipping from Hong Kong:Use IOSS for ≤€150. Design a plan for >€150 (DDP or Special Arrangements). Configure your checkout to collect the correct VAT rate by destination and make sure the carrier transmits your IOSS ID with the parcel data. File a single monthly IOSS return.

2) Amazon and other marketplaces

Best‑fit tool: “Deemed supplier” rules + OSS where you hold EU stock

On many B2C sales, the marketplace is treated as the seller for VAT—it charges and remits VAT as the “deemed supplier.” That’s a powerful simplification for non‑EU businesses: Amazon often handles the VAT on the customer order itself. However, the simplification doesn’t wipe out every obligation. If you store inventory in the EU (for example, in FBA warehouses), local VAT registration is normally required in each country where stock is held, and you’ll use Union OSS to report cross‑border B2C deliveries from that stock into other EU Member States.

From a records standpoint, the EU requires 10 years of OSS/IOSS transaction records, and marketplaces also face extended record‑keeping duties for the transactions they facilitate. Treat that as a data discipline, not an afterthought—tax audits increasingly ride on platform data.

What Hong Kong changes—and what it doesn’t

What changes:

• No VAT/GST in Hong Kong means you’re not juggling domestic consumption‑tax filings at home. Your VAT work is concentrated in the EU’s single‑return frameworks (OSS for intra‑EU distance sales from EU stock; IOSS for ≤€150 imports), or ceded to marketplaces under “deemed supplier” rules.

• Low, simple corporate tax in Hong Kong (two‑tiered 8.25%/16.5%) and a territorial system reduce back‑office load and make cash‑flow planning more predictable as you scale.

What doesn’t change:

• EU VAT remains due where the customer lives; a Hong Kong company doesn’t eliminate VAT—it helps you comply more cleanly. The €10k micro‑threshold is an EU‑established‑seller perk; non‑EU sellers can’t use it.

• Warehousing in Europe normally triggers local VAT registration in each storage country (Germany’s tax ministry guidance is explicit on the kinds of taxable supplies that arise when selling from a German warehouse). If you’re on Pan‑EU FBA, expect a small roster of VAT numbers.

A quick decision tree you can actually use

Q1: Do you store goods in the EU?

• No. Use IOSS for ≤€150 consignments; plan DDP or Special Arrangements for >€150. You likely don’t need local VAT registrations if you’re not warehousing, and for marketplace sales under the deemed‑supplier rules, the platform generally collects VAT.

• Yes. Register for VAT in each storage country. Use Union OSS to report cross‑border B2C shipments from that stock to customers in other Member States—one quarterly return instead of many. Marketplace transactions may still be “deemed supplier,” but your stock‑based obligations remain.

Q2: Marketplace or your own site?

• Marketplace (Amazon): Lean on deemed supplier—the platform charges/remits VAT on many B2C sales. Keep robust records (10 years under OSS/IOSS record‑keeping rules) and maintain VAT numbers where you store goods.

• Shopify: IOSS (≤€150) + correct VAT at checkout; ensure your IOSS ID is passed in customs data; monthly IOSS returns. For >€150, plan DDP or Special Arrangements.

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The finer points most sellers miss

Intermediary for IOSS (non‑EU sellers): If your company isn’t established in the EU, you’ll generally need an EU‑established intermediary to register for IOSS and to be jointly liable for VAT filings and payments. (There are narrow mutual‑assistance exceptions such as Norway.)

Monthly vs. quarterly: 

IOSS returns are monthly; Union OSS returns are quarterly. Plan your cash and reconciliation cadences accordingly.

Customs data matters: 

Using IOSS does not remove the need for a customs declaration, but it does change how import VAT is treated at the border. If the IOSS number isn’t correctly transmitted, parcels can be stopped or double‑charged. Work with carriers who have solid IOSS workflows.

Record‑keeping: 

Whether you file via OSS/IOSS directly or rely on a platform, keep electronic records for 10 years and be prepared to share them with the Member State of identification or consumption on request. Build this into your OMS/ERP.

Permanent establishment (corporate tax): 

VAT rules and corporate tax nexus aren’t the same. If you put people or a dependent agent in Europe—or your warehouse activities exceed “auxiliary” functions—you may create a PE and face local corporate tax. That’s a separate analysis from VAT; get bespoke advice if you’re staffing up in the EU. (General EU/Member State corporate tax guidance applies; treat this as a risk flag to review with counsel.)

What’s changing next (ViDA): plan for 2027–2030 and beyond

On March 11, 2025, EU finance ministers adopted VAT in the Digital Age (ViDA)—a multi‑year modernization that expands single‑registration concepts, tightens platform rules, and phases in digital reporting and e‑invoicing for intra‑EU B2B by 2030. Expect sharper controls around IOSS use and a broader push toward “report once, pay once” models. The takeaway for operators: choose VAT providers and tools that can adapt as OSS/IOSS grow up.

A practical setup—for a Hong Kong company selling into the EU

Step 1: Incorporate in Hong Kong and open rails.

Form a private limited company, open bank and payment accounts. You’ll file profits tax in Hong Kong at the two‑tiered rates; there’s no VAT/GST to register domestically.

Step 2: Choose your channel mix.

If you’re Shopify‑only and ship from Asia: register for IOSS via an intermediary; configure checkout by destination; ensure IOSS ID flows to the carrier; file monthly. For >€150, arrange DDP or accept Special Arrangements.

If you’re Amazon FBA:

get VAT numbers in storage countries; rely on deemed supplier for qualifying B2C orders; use Union OSS for cross‑border B2C from your EU stock (one quarterly return). Keep 10‑year records.

Step 3: Build the controls.

• Tax determination by destination (rates, exemptions).

• IOSS/OSS calendar (monthly vs. quarterly).

• Carrier EDI checks (IOSS ID present).

• Marketplace settlement VAT reconciliation.

• Archival: 10‑year record retention.

Common myths—cleared up

• “If I open in Hong Kong, I don’t owe EU VAT.”

  False. VAT is destination‑based; a Hong Kong company simplifies your corporate taxes, not your EU VAT liability. Use OSS/IOSS or marketplace rules to simplify compliance, not to avoid tax.

• “The €10k EU threshold protects my non‑EU store.” 

  No. That micro‑threshold is conditioned on being established in one Member State; it doesn’t protect non‑EU traders.

• “Amazon handles everything, so I don’t need VAT numbers.” 

  Not if you store inventory in the EU. Stock on the ground typically means local VAT registration where the stock sits, even if the marketplace is the deemed supplier for the sale. Use Union OSS for cross‑border B2C movements from that stock.

The payoff: fewer filings, cleaner checkout, happier customers

With the right structure, a Hong Kong entity lets you focus on growth instead of paperwork. On Shopify, IOSS removes border frictions for low‑value orders and consolidates VAT collection into a single monthly filing; for Amazon, the deemed‑supplier framework moves much of the B2C VAT work to the platform while you maintain targeted registrations linked to inventory. Pair that with Hong Kong’s no‑VAT regime and simple profits tax, and you’re spending more time buying ads and improving conversion—and less time chasing VAT numbers across Europe.

Important note (not tax advice)

Every detail—stock location, contracts, who’s the importer of record, whether you have staff in the EU—can change your answer. Treat the outline above as an operations blueprint to take to your VAT adviser, together with your logistics partner, before you go live at scale.