Section 88 Pack HK: Inland Revenue Ordinance Cap. 112

Hong Kong has no charity commission, no charity register and no statutory definition of charity. Recognition under section 88 is a tax status granted by the Inland Revenue Department, not a form of registration: the Department processes exemption applications, it does not govern charities. The law applied is judge made, imported from English authority and refined by published departmental practice, which is why the application is never a single form. It is a governing instrument carrying the objects and the governance clauses, a covering letter seeking recognition, and an evidence bundle of past and planned activities.

Keep the tax status separate from the legal form. A society registers with the Societies Officer under the Societies Ordinance (Cap. 151); a company limited by guarantee incorporates with the Companies Registry under the Companies Ordinance (Cap. 622). Neither step confers charitable status, and neither exempts a single dollar of profit. Section 88 sits on top of whichever vehicle you chose, which is why our Hong Kong non-profit and association templates treat constitution drafting and exemption drafting as one connected exercise.

Section 88 exempts a charitable institution or trust of a public character from profits tax, subject to conditions. What counts as charitable comes from the dictum of Lord Macnaghten in Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531: relief of poverty, advancement of education, advancement of religion, and other purposes beneficial to the community. Purposes under the first three heads may be pursued anywhere in the world, but a purpose under the fourth head is charitable only if it benefits the Hong Kong community. The objects must be exclusively charitable, so one non-charitable purpose sitting alongside worthy ones defeats the whole application. The organisation must also be established for public benefit, which rules out bodies serving their own members, and must act lawfully and safeguard national security, since support for acts contrary to the interests of national security is grounds for withdrawing recognition.

Section 88 exempts the charity, not every stream of income it earns. The proviso makes trading profits exempt only where they are applied solely for charitable purposes, are not expended substantially outside Hong Kong, and either the trade is carried on in the course of actually carrying out the expressed objects or the work is done mainly by the beneficiaries. Letting property to unconnected tenants fails that test. Recognition does bring collateral relief: a gift of immovable property or Hong Kong stock to a charity escapes stamp duty under section 44 of the Stamp Duty Ordinance (Cap. 117), business registration is exempt under section 16(1) of the Business Registration Ordinance (Cap. 310), and donors deduct approved charitable donations up to 35 per cent of assessable income or profits under sections 16D and 26C. The Inland Revenue Department procedures for recognition of tax exemption under section 88 set out the forms and the lodgement address. For a limited company the governing instrument is its constitution, so these clauses belong in the articles of association drafted under the Companies Ordinance (Cap. 622) before incorporation, not after.

The commonest moment is incorporation. A founding group forms a company limited by guarantee, and the draft articles and the exemption application are prepared together, because the Department accepts an application lodged before incorporation on the strength of draft articles and a list of proposed directors. That sequence saves a special resolution later. The second scenario is the society running on donations for two or three years that now needs receipts its donors can use. Its constitution was written for the Societies Office, not for the Department, and usually lacks the funds, remuneration and dissolution clauses.

The third trigger is amendment. Any change to the objects, the remuneration rules or the dissolution provision of a recognised charity must be reported, and organisations that expand into new work often find their stated objects no longer cover it. Two edge cases justify care. A body whose beneficiaries sit outside Hong Kong can rely on the poverty, education or religion heads, but one pursuing environmental aims abroad falls under the fourth head and will struggle without local benefit. A charity planning a social enterprise arm should test the proviso conditions before it trades, not after the first assessment.

• The objects clause is written to one or more of the four heads and states purposes rather than activities. Loose formulas such as promoting the welfare of the community read as too wide, and an ancillary non-charitable purpose is fatal rather than harmless.
• The application of funds clause confines income and property to the attainment of the stated objects and prohibits any distribution, direct or indirect, to members. This pair is the financial lock the Department looks for first.
• The remuneration clause bars salaries or fees to members of the governing body, with optional relaxation wording for the exceptional case where the member holds qualifications the organisation cannot otherwise obtain and withdraws from the decision.
• The conflict of interest clause obliges every director, committee member or trustee to disclose a material interest in any transaction or contract and to abstain from voting on it, with both facts minuted.
• The dissolution clause directs remaining assets, after debts, to another organisation with similar objects that is itself exempt under section 88, so charitable property never returns to members.
• The accounts clause requires proper books of income and expenditure, retention of donation receipts and annual financial statements, supporting the duty to produce accounts on request.

The pack also holds the covering letter, the twelve month activity statements and the list of governing body members. Where a fact must be verified on oath for a bank or funder, a statutory declaration with a Hong Kong jurat is the usual companion.

Company limited by guarantee. This is the structure most large Hong Kong charities use. The governing instrument is the articles of association filed with the Companies Registry, so every exemption clause is public and every later amendment needs a members' resolution and a filing. In exchange the organisation gets separate legal personality, limited liability and a governance framework the Department already recognises. Directors stay bound by their statutory duties, so the conflict rules in the articles work alongside the obligations covered in our company incorporation and secretarial documents.

Registered society. A society applies to the Societies Officer, an office within the Hong Kong Police Force, within one month of establishment under the Societies Ordinance (Cap. 151). Registration is quick, which explains its popularity with community groups, but a society is not a separate legal person, so office bearers can carry personal exposure for its debts. Constitutions drafted for the Societies Office concentrate on membership and committee procedure, and their silence on funds, remuneration and dissolution is the commonest reason an exemption application comes back for amendment.

Charitable trust. The governing instrument is a trust deed and the charity has no legal personality: the trustees hold the assets and contract in their own names. Endowment style giving still uses this route, sometimes with incorporation of the trustees under the Trustees Incorporation Ordinance (Cap. 306). The deed needs the same objects, funds, conflict and dissolution provisions, and the trustees carry fiduciary duties beyond anything the Department asks for.

You begin by choosing the vehicle, because the questionnaire branches there: articles of association for a company, a constitution for a society, a trust deed for trustees. The form then asks which of the four heads your purposes fall under and prompts you to state each object in a single sentence, flagging entries that describe activities rather than purposes. You give the name and address of the organisation, the composition of the governing body and the voting rules, and the funds, remuneration, conflict, dissolution and accounts clauses are inserted in the order the Department reads them.

The second half builds the application file. You describe the activities of the past twelve months and those planned for the next twelve, and the covering letter assembles them with the enclosures: certificate of incorporation or registration, certified true copy of the governing instrument, list of governing body members, and accounts for the last financial year where the organisation is eighteen months old or more. Download in Word to settle the wording with your accountant, or in PDF for signature. Related paperwork sits in the complete Hong Kong template library.

Most rejections trace back to the objects clause. Applicants describe what they do instead of the purposes for which they exist, list a dozen aims of which one turns out to be political or member serving, or copy an overseas precedent that relies on a statutory list of charitable purposes Hong Kong has never enacted. The next problem is the missing lock: no clause restricting income and property to the objects, or a dissolution clause letting surplus assets pass to members. A close relative is the constitution allowing committee members an honorarium without meeting the relaxation conditions, which reads as a distribution in disguise.

The file itself causes the rest of the delay. Incomplete applications are returned before processing begins, so an absent certified copy costs weeks, and activity lists written in one line of generalities invite a request for further information that suspends the four month pledge. After recognition the obligations continue: tell the Department in writing whenever the governing instrument, the objects or the circumstances of the charity change, and keep accounts ready, because exemption is reviewed periodically and can be withdrawn.