Not all “charitable” or “non-profit-making” organizations are approved charities and exempted from tax, however worthy their causes may be.
For a company limited by guarantee, a trust or a society registered under the Societies Ordinance of Hong Kong to become a charity, it must be established for objects which are exclusively charitable.
The followings are well established charitable objects:
- relief of poverty;
- advancement of education;
- advancement of religion; and
- other purposes of a charitable nature beneficial to the community
Only charitable institutions or organizations approved by the Commissioner of Inland Revenue of Hong Kong under section 88 of the Inland Revenue Ordinance are approved charities and exempt from taxes.
The two most common types of charity structures are:
- Charitable trust;
- Company limited by guarantee incorporated under the Companies Ordinance as a charity
(In some instances, a society established under Societies Ordinance may apply to become a charity)
The Inland Revenue Department generally considers the following matters when deciding whether to approve a trust or guarantee company to be a charity under section 88 and exempt from profits tax:
- (i) Examine the Object Clauses of trust or company
- (ii) Examine the governance provisions of the trust or company
- (iii) Review and examine future charitable work plan
- (iv) Whether the profit earned by the charity from business operations is exempt from profits tax
We are experienced in establishing charities, in the form of trusts or companies limited by guarantee, and apply to the Inland Revenue Department for approval to be included in the official list of charitable institutions.
We also help to set up internal system of management and governance and provide annual compliance and audit services to approved charities.