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A Tax Guide for Charitable Institutions and Trusts of a Public Character

This pamphlet is issued as a guide only. It has no binding force and does not affect a person's right of objection or appeal to the Commissioner, the Board of Review or the Courts.

1. The Department is not responsible for the registration of charities. However, subject to certain limitations, charitable institutions or trusts of a public character are exempt from tax under section 88 of the Inland Revenue Ordinance (Cap 112). Charities wishing to enjoy the tax exemption may apply to the Department.


Charity is not equivalent to "voluntary" or "non-profit-making" organisation

Not all "voluntary" or so-called "non-profit-making" organisations are charities, however worthy their causes may be. In fact, there is no provision in the Inland Revenue Ordinance which exempts a "voluntary" or "non-profit-making" organisation from tax.


Charity must be established exclusively for charitable purposes

Generally speaking, for an institution or a trust to be a charity, it must be established for purposes which are exclusively charitable according to law. The legal attributes of a charity are based upon case law developed through court decisions.


Charitable purposes are classified into four heads

For practical purposes, the judgement of Lord MacNaghten in the case of I T Special Commissioners v Pemsel (3 TC 53) is regarded as an authoritative summary of the purposes that may be accepted as charitable. These are: -

(a) relief of poverty;
(b) advancement of education;
(c) advancement of religion; and
(d) other purposes of a charitable nature beneficial to the community not falling under any of the preceding heads.
While the purposes under the first three heads may be in relation to activities carried on in any part of the world, those under head (d) will only be regarded as charitable if they are of benefit to the Hong Kong community.


Charity must be established for public benefit

A purpose is not charitable unless it is directed to the public or a sufficient section of it. An institution cannot generally be charitable if it is in principle established for the benefit of specific individuals. It is, however, not possible to lay down any precise definition of what constitutes a sufficient section of the public. Each case must be considered on its own merit.


Examples of purposes held by the court to be charitable and non-charitable purposes are given in the lists shown at Appendix A


Charity should have a governing instrument

It is essential that a charity is established by a written governing instrument. The type of instrument adopted will depend on the particular circumstances pertaining to the charity proposed and the preference of the promoters or founders. Persons who are considering starting a charity are advised to seek legal advice about the format, content and legal validity of the charity's governing instrument. Before seeking advice, persons founding a charity must be clear in their own minds as to the purposes of the charity and the manner in which they wish the charity to be administered. Briefly the most common types of structures are:-

(a) a trust;
(b) a society established under the Societies Ordinance (Cap 151);
(c) a company incorporated under the Companies Ordinance (Cap 32) before 3 March 2014 or the Companies Ordinance (Cap 622) on or after 3 March 2014; and
(d) a statutory body established by the Hong Kong legislature.
In exceptional circumstances, recognition of tax exemption status in respect of some ad hoc committees established for charitable purposes may be possible. Though preparation of governing instrument is strictly not required for a committee of this nature, minutes of the meeting establishing such committee must be ready for inspection.
8. Only charities under the jurisdiction of Hong Kong courts qualify for exemption

Following the principle applied in Camille and Henry Dreyfus Foundation Inc v CIR (36 TC 126), tax exemption will only be given to charities subject to the jurisdiction of the courts in Hong Kong, that is to say, charities established in Hong Kong or Hong Kong establishment of overseas charities such as those deemed to be established in Hong Kong under section 4 of the Societies Ordinance or registered under Part XI of the Companies Ordinance (Cap 32) before 3 March 2014 or under Part 16 of the Companies Ordinance (Cap 622) on or after 3 March 2014.


Clauses that the governing instrument of a charity should generally include:-
(a) clauses stating precisely and clearly the objects for which it is established;
(b) clause limiting the application of its funds towards the attainment of its stated objects;
(c) clause prohibiting distribution of its incomes and properties amongst its members;
(d) clause prohibiting members of its governing body (e.g. directors, trustees, etc.) from receiving remuneration;
(e) clause requiring members of its governing body (e.g. director, trustees, etc.) to disclose material interests and not to vote in respect of any transaction, arrangement or contract or proposed transaction, arrangement or contract in which they are so interested;
(f) clause specifying how the assets should be dealt with upon its dissolution (The remaining assets should normally be donated to other charities);
(g) clause requiring the keeping of sufficient records of income and expenditure (including donation receipts), proper accounting books and compilation of annual financial statements; and
(h) clause excluding the powers set forth in the Seventh Schedule to the Companies Ordinance (Cap 32) (in case the charity is a company incorporated under such Ordinance).


A summary of the tax advantages accorded to charities, in so far as ordinances administered by the Commissioner of Inland Revenue are involved, is as follows:-
(a) Inland Revenue Ordinance
(i) Section 88 provides that charitable institutions or trusts of a public character are exempt from tax under the Inland Revenue Ordinance.
(ii) Proviso to section 88 states that for the purpose of Profits Tax, if a charitable institution or trust of a public character carries on a trade or business, the profits from such trade or business are exempted only if:-
(1)    the profits are applied solely for charitable purposes, and
(2)    the profits are not expended substantially outside Hong Kong, and
(3)   either
(A) the trade or business is exercised in the course of the actual carrying out of the expressed objects of the institution or trust (for example, a religious body might sell religious tracts);
(B) the work in connection with the trade or business is mainly carried on by persons for whose benefit such institution or trust is established (for example, a society for the protection of the blind might arrange for the sale of handicraft work made by the blind).
(iii) For the purposes of Personal Assessment, Salaries Tax and Profits Tax and subject to certain limitations, a deduction is granted for donations of money to charitable institutions or trusts of a public character which are exempt from tax under section 88 or to the Government for charitable purposes.


Stamp Duty Ordinance (Cap 117)

Section 44 of the Stamp Duty Ordinance provides that stamp duty shall not be chargeable on any conveyance of immovable property or any transfer of Hong Kong stock under heads 1(1) (ad valorem stamp duty on property transaction), 1(1AA) (special stamp duty), 1(1AAB) (buyer's stamp duty) or 2(3) (ad valorem stamp duty and fixed duty on stock transaction) in the First Schedule where the beneficial interest therein passes by way of gift from the person entitled to that interest, the registered owner or the transferor, to or on trust for charitable institutions or trusts of a public character. The instrument in question must be submitted to the Collector of Stamp Revenue for adjudication. It is not treated as duly stamped unless it has been stamped with a particular stamp or by way of a stamp certificate denoting either that it is not chargeable with stamp duty or that it is duly stamped.


Business Registration Ordinance (Cap 310)

Where charitable, ecclesiastical or educational institutions of a public character carry on a trade or business, an exemption will only be granted if the conditions set out in section 16(1)(a) of the Business Registration Ordinance are satisfied. These conditions are similar to the conditions set out in the proviso to section 88 of the Inland Revenue Ordinance as explained in sub-paragraph (a)(ii) above.



The word "donation", in its ordinary sense, means a gift. To constitute a gift, the property transferred must be transferred voluntarily and not as a result of a contractual obligation to transfer it and no advantage of a material character is received by the transferor by way of return [see Sanford Yung-tao Yung v Commissioner of Inland Revenue (1 HKTC 1081)].


Persons administering charities should note that donors may be asked to produce receipts for donations in support of any claims they make for an allowance under the Inland Revenue Ordinance. It is therefore important to distinguish donations from other payments when issuing such receipts. Payments other than those which are strictly gifts, e.g. payments made for a grave space, services such as saying prayers, reservation of a space for ancestral worship, admission tickets for film shows, etc., should not be termed as donations. In borderline cases, it is suggested that the exact nature of the payment should be clearly stated on the receipt so that such transaction can be separately considered by the Department.


Though a tax-exempted charity may state on its receipts that donations to it may be tax deductible, such statement must be crossed out when receipts other than donations in the true sense are acknowledged.


A list of charitable institutions and trusts of a public character which are exempt from tax under section 88 of the Inland Revenue Ordinance is available on the Internet from:-



Any organisation wishing to seek exemption from tax as a charitable institution or trust of a public character should submit the following documents to the Department:-
(a) an application letter;
(b) if the organisation has been established:
(i) a copy of the relevant certificate of registration;
(ii) a certified true copy of the instrument and rules governing its activities, i.e. the Articles of Association in the case of a corporation, the Ordinance where the body has been established by statute, the Trust Deed in the case of a trust, or the Constitution in the case of a society;
(iii) a list of any activities which have been carried out in the past 12 months (or less, if appropriate), and a list of activities planned for the next 12 months;
(iv) a list of members of governing body (e.g. directors, trustees, etc.);
(v) a copy of its accounts for the last financial year (if the organisation has been established for 18 months or more).
(c) if the organisation has not yet been established:
(i) a draft of the instrument and rules governing its activities;
(ii) a list of the activities planned for the next 12 months from the date of establishment or date of application, where appropriate;
(iii) a list of founder members / settlors (for trusts only) and proposed members of governing body (e.g. directors, trustees, etc.).


The application should be sent to the Commissioner of Inland Revenue, G.P.O. Box 132, Hong Kong.




The Department will, from time to time, call for accounts, annual reports or other documents to review whether the institution's objects are still charitable and its activities are compatible with its objects.


Charities should notify the Department of any:-
(a) establishment or cessation of subsidiary organisation (which means the organisation which is under a charity's sole ownership and control and which does not have separate written constitution governing its activities. It is not a separate legal entity.);
(b) alteration of governing instrument;
(c) change of name or correspondence address; or
(d) cessation of operation, dissolution or winding up.


Further enquiries should be directed to the Assessor (Donations) on 2594 5300.


20. It is essential that a charity should maintain good management and good accounting practice. The Social Welfare Department, the Home Affairs Department, the Food and Environmental Hygiene Department and the Independent Commission Against Corruption have issued guidance on the best practices for charitable fund-raising activities. Please refer to the following links for information:

(a) "Good Practice Guide on Charitable Fund-raising" by the Social Welfare Department, Home Affairs Department, and Food and Environmental Hygiene Department

(b) "Best Practice Checklist - Management of Charities and Fund-raising Activities" by the Independent Commission Against Corruption

21. The Narcotics Division of the Security Bureau has issued "An Advisory Guideline on Preventing the Misuse of Charities for Terrorist Financing". Please refer to the following links for information:

(a) Guideline

(b) Appendix

22. For enquiries, please contact the relevant departments.


WONG Kuen-fai
 Commissioner of Inland Revenue,
Collector of Stamp Revenue.

December 2018
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Appendix A 


(a) Relief of poor people;
(b) Relief of victims of a particular disaster;
(c) Relief of sickness;
(d) Relief of physically and mentally disabled;
(e) Establishment or maintenance of non-profit-making schools;
(f) Provision of scholarships;
(g) Diffusion of knowledge of particular academic subjects;
(h) Establishment or maintenance of a church;
(i) Establishment of religious institutions of a public character;
(j) Prevention of cruelty to animals;
(k) Protection and safeguarding of the environment or countryside.


(a) Attainment of a political object;
(b) Promotion of the benefits of the founders or subscribers;
(c) Provision of a playing field, recreation ground or scholarship fund for employees of a particular company or industry;
(d) Encouragement of a particular sport such as angling or cricket.