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Taxation of Charities in Hong Kong – Pressure for Change?

The Inland Revenue Ordinance of Hong Kong (Cap. 112 of the Laws of Hong Kong) (“IRO”) has contained provisions dealing with charities since 1949. The direct effect of those provisions (contained in Section 88 IRO) is to provide an exemption from tax for “charitable institutions and trusts of a public character”. An indirect effect, however, is to regulate the deduction of donations to charities. In particular, charitable donations are deductible, subject to certain limitations, but only where the recipient is an institution which qualifies for the tax exemption under Section 88 IRO. Moreover, an exemption from stamp duty is provided for certain transfers of immoveable property or Hong Kong stock to, or on trust for, a charitable institution or trust of a public character. This article looks at the legislative provisions, as well as the practices of the Hong Kong Inland Revenue Department (IRD), with regard to charities and considers whether those practices might be expected to change as a result of recent developments in Hong Kong and elsewhere.