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Is a Tax-Exempt Charitable Institution Really Tax Exempt in Hong Kong?

Charities are a part of every society. There are many organisations in Hong Kong that conduct various activities to help those who are in need or less fortunate. But despite their good underlying intentions, not all “voluntary” or so-called “nonprofit- making” organisations are charities for tax purposes. In fact, there is no provision in the Inland Revenue Ordinance (IRO) which exempts a “voluntary” or “non-profit-making” organisation from tax. But under Section 88 of the IRO, charitable institutions or trusts of a public character are exempt from tax subject to certain limitations. The charitable institution may apply to the Inland Revenue Department (IRD) for tax exemption under Section 88. In this article, we will cover 1) the definition of a charity from a Hong Kong tax perspective; 2)the advantages of having charitable status under Section 88; 3) the relevant statutory law, a relevant court case, and our comments; 4) our observations; and 5) our concluding remarks.