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Charitable organisation (s88)
Tax-exempt status · Section 88 of the Inland Revenue Ordinance
Relevant authorityInland Revenue Department (Charitable Donations Section)
Relevant legislationSection 88 of the Inland Revenue Ordinance (Cap. 112)
Nature of the statusTax-exempt status for charities, rather than a commercial licence
Tax treatmentTax exemption and deductions for approved charitable donations may apply where the relevant conditions are met
Purpose of tax-exempt status
Under section 88 of the Inland Revenue Ordinance, a charitable institution or trust of a public character may seek recognition of tax-exempt status where its purposes are exclusively charitable and its activities principally advance those purposes. The tax treatment of income and donations remains subject to the applicable law and conditions. Charitable purposes must fall within one of the four common-law categories: relief of poverty, advancement of education, advancement of religion, or other purposes beneficial to the community that are charitable in nature.
Main application requirements
- A governing instrument is required: articles of association for a company, a trust deed for a trust, or a constitution for a society. It must set out the charitable purposes and required provisions, such as applying income only to charitable purposes, prohibiting distributions to members and dealing with assets on dissolution;
- The purposes must be exclusively charitable and for the public benefit;
- Submit information on governing members, activities, finances and other matters required by the Inland Revenue Department's current application form;
- A company limited by guarantee, trust or another suitable structure may be used. The legal form alone does not establish eligibility for section 88 tax exemption.
Application process
- Define the charitable purposes and governance structure;
- Choose a suitable legal structure and prepare a governing instrument meeting the charitable purpose and governance requirements;
- Submit the application, governing instrument and activity plan to the IRD's Charitable Donations Section;
- Respond to IRD enquiries;
- After tax-exempt status is recognised, continue to meet the applicable conditions. The IRD reviews charities periodically, and changes must be reported as required.
Formation and structure review
Section 88 tax-exempt status differs from acquiring a commercial licensed company. We assist with forming a charitable organisation and applying for section 88 recognition, or reviewing and improving an existing charitable structure, including preparation and review of information required by the IRD.