Did you know that Hong Kong’s charitable sector has grown to over 10,600 tax-exempt organizations, with donors claiming billions in tax deductions annually? As Hong Kong positions itself as Asia’s premier philanthropic hub, understanding Section 88 tax exemptions has never been more critical for charities, donors, and family offices alike. This comprehensive guide breaks down everything you need to know about Hong Kong’s charitable tax landscape in 2024-2025.

Understanding Section 88: Hong Kong’s Charitable Tax Exemption Framework

Section 88 of the Inland Revenue Ordinance (IRO) serves as the cornerstone of Hong Kong’s charitable tax system. This provision grants qualifying charitable institutions and trusts of a public character exemption from profits tax, allowing them to channel more resources directly toward their charitable missions rather than tax payments.

What Qualifies as Charitable Purposes?

To qualify for Section 88 exemption, an organization must be established exclusively for one or more of these recognized charitable purposes:

• Relief of poverty – Programs and services that alleviate financial hardship and improve living conditions
• Advancement of education – Educational institutions, scholarship programs, research initiatives, and educational support services
• Advancement of religion – Religious organizations and activities promoting spiritual development
• Other purposes beneficial to the community – Health services, environmental protection, arts and culture, community development, and other public benefit activities

Recent Amendments and Updates (2023-2025)

1. New Formalized Application Procedures (2023-2024)

Following Hong Kong SAR Government’s March 2023 Policy Statement on developing family office businesses, the Inland Revenue Department introduced significant procedural changes to support Hong Kong’s development as a philanthropic center for global family offices and philanthropists.

2. Proposed Endowment Fund Enhancement (2024)

Following the 2024/25 Budget speech and the Chief Executive’s 2024 Policy Address, the Financial Services and Treasury Bureau issued a consultation paper on November 25, 2024, proposing significant enhancements to tax regimes for funds, including charitable endowment funds.

3. Enhanced Monitoring and Transparency Measures

The government has implemented several administrative measures to strengthen charitable sector accountability:

• Public Disclosure: Publishing audited accounts from approved fund-raising organizations on GovHK’s website
• Best Practice Guidance: Issuance of the “Good Practice Guide on Charitable Fund-raising” with encouragement for voluntary adoption
• Dedicated Hotline: Establishment of a complaint and inquiry hotline for charitable fund-raising activities
• Regular Reviews: The IRD regularly reviews tax-exempt charities to ensure objectives remain charitable and activities align with stated purposes

Core Eligibility Requirements for Section 88 Exemption

Donor Benefits: Tax Deductions for Charitable Contributions

One of the most significant benefits of Section 88 status is the ability for donors to claim tax deductions on their contributions. This creates a powerful incentive for both individual and corporate philanthropy in Hong Kong.

What Qualifies as a Deductible Donation?

• Direct monetary donations to Section 88-exempt charities
• Bank transfers or cheques made payable to approved charitable organizations
• Online donations through authorized payment platforms to registered charities
• Government donations for charitable purposes

What Does NOT Qualify?

• Purchase of lottery tickets or raffle tickets
• Admission tickets for charity shows or events
• Purchase of a grave space
• Purchase of goods in charity bazaars
• Payment for services such as saying prayers or reservation of space for ancestral worship
• Donations of property, works of art, or other non-monetary assets
• Donations made in the name of your children (must be in your name or your spouse’s name if not living apart)

Step-by-Step Application Process

1. Review Tax Guide: Read the IRD’s “Tax guide for charitable institutions and trusts of a public character” and “Notes to Applicants” thoroughly before preparing your application
2. Complete Application Form: Fill out the standardized application form with all required information, including organization details, governing instrument provisions, charitable purposes, detailed activity descriptions using the IRD proforma, and governance structure
3. Gather Required Documents: Certified true copy of governing instrument, list of activities carried out in the past 12 months, list of planned activities for the next 12 months, copy of accounts for the last financial year (if established for 18+ months), list of governing body members, and for new charities: list of founder members/settlors (for trusts)
4. Submit Application: Send completed application with all supporting documents to: Commissioner of Inland Revenue, G.P.O. Box 132, Hong Kong
5. IRD Review: The Department endeavors to respond within 4 months if all relevant information is provided and no further clarification is needed
6. Approval and Listing: Upon approval, the IRD issues written confirmation and adds the organization to the public list of tax-exempt charitable institutions on its website

Ongoing Compliance and Reporting Obligations

Maintaining Section 88 status requires continuous compliance with several key obligations. The IRD regularly reviews tax-exempt charities to ensure they continue to meet all requirements.

Consequences of Non-Compliance

Failure to maintain compliance can result in serious consequences:

• Withdrawal of tax-exempt status – In 2024, 267 charities had their exemptions withdrawn
• Back taxation – Liability for profits tax on income previously considered exempt
• Loss of donation deductibility – Donors can no longer claim tax deductions for contributions
• Reputational damage – Public listing removal and reduced public trust

Hong Kong Charitable Sector Overview (2024)

The data demonstrates a healthy and growing charitable sector in Hong Kong, with new applications exceeding withdrawals by a significant margin. The government’s initiatives to develop Hong Kong as a philanthropic center appear to be encouraging new charitable formation while maintaining quality control through regular reviews.

Hong Kong’s Section 88 charitable tax exemption regime represents a sophisticated balance between encouraging philanthropy and maintaining regulatory oversight. As the territory positions itself as Asia’s premier philanthropic hub, understanding these regulations becomes increasingly important for charities, donors, family offices, and wealth managers. Whether you’re establishing a new charity, making substantial donations, or managing a philanthropic portfolio, staying informed about Section 88 requirements and recent amendments ensures you maximize both social impact and tax efficiency.