The Intersection of Philanthropy and Tax Planning: Hong Kong’s Unique Advantages

Introduction: Hong Kong’s Strategic Position in Asian Philanthropy

Hong Kong has emerged as a leading philanthropic hub in Asia, hosting over 10,000 tax-exempt charities and approximately 2,700 single-family offices, with more than half established by ultra-high-net-worth individuals with assets exceeding US$50 million. The city’s unique combination of robust tax incentives, clear regulatory frameworks, and the absence of estate duty creates an exceptionally favorable environment for strategic philanthropic planning.

For individuals and corporations seeking to maximize both social impact and tax efficiency, understanding Hong Kong’s charitable giving framework is essential. This comprehensive guide explores the intersection of philanthropy and tax planning, examining how Hong Kong’s distinctive advantages can be leveraged for effective charitable giving strategies.

The Legal Framework: Sections 26C, 16D, and 88

Section 26C: Individual Charitable Donations

Section 26C of the Inland Revenue Ordinance (IRO) provides the statutory basis for tax deductions on approved charitable donations for individuals subject to salaries tax or personal assessment. The provision allows taxpayers to deduct qualifying donations from their assessable income, reducing their overall tax liability.

Section 16D: Corporate Charitable Giving

Section 16D provides parallel deduction provisions for corporations subject to profits tax. This creates parity between individual and corporate giving, enabling businesses to incorporate charitable donations into their corporate social responsibility and tax planning strategies.

Section 88: Tax-Exempt Charitable Institutions

Section 88 of the IRO establishes the framework for recognizing charitable institutions and trusts of a public character as tax-exempt entities. Organizations granted Section 88 status are exempt from profits tax and can receive tax-deductible donations from donors. The provision states that “any charitable institution or trust of a public character is exempt from tax and shall be deemed always to have been exempt.”

To qualify for Section 88 exemption, organizations must meet three critical conditions:

• Profits must be applied solely for charitable purposes
• Profits must not be expended substantially outside Hong Kong
• Either the trade or business must be exercised in the course of carrying out the charity’s expressed objects, or the work must be mainly carried on by persons for whose benefit the charity is established

Tax Deduction Mechanics: Maximizing Your Benefits

Deduction Limits and Thresholds

The current charitable donation deduction framework represents a significant evolution from earlier, more restrictive limits. The ceiling on allowable tax deductions has increased progressively from 10% in 2002 to 25% in 2003, reaching the current 35% in 2008. This expansion reflects Hong Kong’s commitment to encouraging philanthropic activity.

Parameter	Individual (Sections 26C)	Corporate (Section 16D)
Maximum Deduction	35% of assessable income	35% of assessable profits
Minimum Aggregate	HKD 100 per year of assessment	HKD 100 per year of assessment
Eligible Form	Monetary donations only	Monetary donations only
Recipient Requirement	Section 88 charities or Government	Section 88 charities or Government

What Qualifies as an “Approved Charitable Donation”

An approved charitable donation is defined as any financial contribution made for philanthropic purposes to the Hong Kong Government or any charitable institution or trust of a public character exempt from tax under Section 88 of the IRO. Critical requirements include:

Monetary Form: Only cash donations qualify for tax deductions. In-kind contributions, regardless of their value, are not eligible for deduction. This includes donations of property, equipment, goods, or services.

Gift Requirement: The donation must constitute a genuine gift, meaning property is transferred voluntarily without the donor receiving any advantage of a material character in return. This distinguishes true charitable donations from commercial transactions.

Non-Qualifying Payments: The following do not qualify as approved charitable donations:

• Purchase of raffle tickets or lottery tickets
• Admission tickets for charity shows or events
• Buying goods at charity bazaars
• Fees for services such as religious ceremonies
• Membership fees or subscriptions

Timing and Tax Year Considerations

Hong Kong’s tax year runs from 1 April to 31 March of the following year. Accurate timing is essential for correctly reporting charitable donation deductions. A donation made on 10 April 2024, for example, is eligible for deduction in the tax year ending 31 March 2025 (year of assessment 2024/25), not the year ending 31 March 2024 (year of assessment 2023/24).

The Inland Revenue Department issues tax returns in May each year. Donors who make contributions during the financial year (1 April to 31 March) can claim deductions on the tax return issued in the following May.

Corporate vs Individual Giving: Strategic Considerations

Individual Charitable Giving Strategy

For high-net-worth individuals subject to the progressive salaries tax rates (reaching 17% at the top marginal rate under the standard rate system), charitable donations provide meaningful tax relief while supporting causes aligned with personal values. Under personal assessment, individuals can consolidate all sources of income and claim charitable donation deductions against their total assessable income.

Example Calculation: An individual with assessable income of HKD 2,000,000 making charitable donations of HKD 800,000 would be limited to a deduction of HKD 700,000 (35% of HKD 2,000,000). The excess HKD 100,000 cannot be carried forward to future years and receives no tax benefit.

Corporate Giving Strategy

Corporations subject to profits tax at 16.5% (8.25% on the first HKD 2 million under the two-tiered profits tax regime) can strategically deploy charitable donations as part of their corporate social responsibility programs while optimizing tax efficiency. Approved charitable donations totalled approximately HKD 7 billion annually under Hong Kong’s profits tax regime.

Corporate donations offer several strategic advantages:

• Brand Enhancement: Public charitable giving strengthens corporate reputation and stakeholder relationships
• Employee Engagement: Charitable programs can enhance employee satisfaction and retention
• Tax Efficiency: Deductions reduce effective tax rates while supporting community initiatives
• Long-term Planning: Regular giving programs can be integrated into multi-year strategic plans

Comparative Analysis: Individual vs Corporate

Factor	Individual Giving	Corporate Giving
Tax Rate Benefit	Up to 17% (standard rate)	16.5% or 8.25% (two-tier)
Deduction Ceiling	35% of assessable income	35% of assessable profits
Public Recognition	Personal discretion	Brand enhancement opportunity
Strategic Integration	Personal estate planning	CSR and stakeholder management
Documentation	Personal tax return	Corporate accounts and tax return

Philanthropic Structures: Vehicles for Strategic Giving

Charitable Trusts

Charitable trusts represent a traditional and flexible vehicle for philanthropic endeavors, particularly favored by family offices for multi-generational legacy planning. Trustees manage trust assets and distributions, providing operational flexibility while maintaining donor intent through the trust deed.

Key Advantages:

• Flexible control and governance structures
• Privacy in charitable giving decisions
• Ability to adapt to changing charitable priorities
• Intergenerational family involvement
• Professional trustee management options

Considerations: Trusts require careful drafting to ensure compliance with Section 88 requirements and must be managed to avoid substantial expenditure outside Hong Kong.

Companies Limited by Guarantee (CLGs)

Companies limited by guarantee offer a more formal governance framework, preferred by corporations and public-facing charities. CLGs provide limited liability protection to members while maintaining a non-profit structure focused on charitable objectives.

Key Advantages:

• Corporate legal personality and limited liability
• Formal governance through board of directors
• Enhanced credibility with institutional donors
• Clearer succession and management structures
• Easier to scale operations and fundraising

Considerations: CLGs require compliance with Companies Ordinance requirements, annual filings, and more transparent reporting than trusts.

Family Foundations and Single Family Offices

Hong Kong’s concentration of approximately 2,700 single family offices has driven innovation in philanthropic structures. The 2024 tax reforms specifically addressed beneficial interests that qualified charities may hold in family-owned investment-holding vehicles, making it easier for wealth owners to direct resources to philanthropic causes.

Family offices increasingly integrate charitable giving with wealth management, estate planning, and family governance. This holistic approach leverages Hong Kong’s tax advantages while building lasting philanthropic legacies.

Endowment Funds

Recent November 2024 tax reform proposals have specifically addressed endowment funds in the Unified Fund Exemption regime. Endowment funds are defined as funds managed for charitable organizations to support ongoing philanthropic activities, providing sustainable long-term funding sources.

Identifying Approved Charitable Institutions

The Section 88 List

The Inland Revenue Department maintains a searchable database of charitable institutions and trusts of a public character recognized for tax exemption under Section 88. This list is accessible at the IRD website and provides essential verification for donors seeking to claim tax deductions.

Subject to the consent of the charitable organizations, the list includes:

• Full legal name of the charity
• Date of tax exemption approval
• Charitable purposes and objectives

Due Diligence: Before making significant donations, donors should verify the recipient’s Section 88 status through the official IRD search function. This ensures deductibility and confirms the organization’s continuing compliance with charitable requirements.

Charitable Purposes Recognized

Organizations qualify for Section 88 exemption when established exclusively for one or more of the following charitable purposes:

Relief of Poverty	Organizations providing direct assistance to those in financial need, including food banks, homeless shelters, and poverty alleviation programs
Advancement of Education	Schools, universities, scholarship programs, research institutions, and educational support organizations
Advancement of Religion	Places of worship, religious education, and organizations promoting religious practice and values
Other Purposes Beneficial to the Community	Environmental protection, arts and culture, health services, community development, and other activities benefiting Hong Kong society

Application Process for Section 88 Status

Organizations seeking Section 88 recognition should consult the IRD’s “Tax Guide for Charitable Institutions and Trusts of a Public Character” before submitting applications. The Department endeavors to respond within 4 months of receiving a complete application with all required information.

Typical processing timelines range from 6 to 12 months for properly structured applications. Delays commonly occur when documentation is incomplete or when the IRD requires clarification regarding the organization’s objectives, governance, or operational plans.

Documentation and Compliance Requirements

Receipt Requirements

Proper donation receipts are essential for claiming tax deductions. To assist donors, receipts should contain:

• Charity’s Full Legal Name: Exactly as stated in constitutional or formation documents and Section 88 approval
• Donation Amount: Stated clearly in Hong Kong dollars
• Date of Donation: Precise date for tax year allocation
• Donor Identification: Full name or sufficient identification to link the donor to the contribution
• Section 88 Status Confirmation: While not mandatory, many charities include their Section 88 reference number

Record Retention

The IRD mandates retention of all donation receipts and supporting documentation for at least 6 years following the end of the basis period to which the tax return relates. For example, for year of assessment 2024/25, receipts must be retained until at least 31 March 2031.

Critical Warning: While digital copies can be useful for personal organization, the IRD may specifically request original receipts during inquiries or audits. Cash donations made without obtaining receipts, such as dropping money in collection bags during religious services, cannot be substantiated and will not be allowed as deductions.

Filing Procedures

When completing tax returns, taxpayers need not attach donation receipts at the time of submission. However, receipts must be available for production if the case is selected for review. The IRD employs risk-based selection processes to verify claimed deductions.

If deductions previously allowed in good faith are found to be unsubstantiated or false, the Assessor will withdraw the deductions and issue additional assessments. For false claim cases, penalties may be imposed or prosecution instituted under the IRO’s anti-avoidance and penalty provisions.

Recent IRD Guidance and 2024 Developments

Impact Link Initiative

In March 2024, the Hong Kong SAR Government launched Impact Link under the Hong Kong Academy for Wealth Legacy. This initiative aims to connect donors with impactful social projects, facilitating more strategic and effective philanthropic engagement. The platform provides due diligence on charitable projects and helps donors identify causes aligned with their values and impact objectives.

November 2024 Tax Reform Proposals

The November 2024 government tax reform proposals introduced significant changes affecting philanthropic structures:

Unified Fund Exemption Expansion: The proposals specifically include pension funds and endowment funds within the regime, addressing previous gaps. This expansion recognizes the important role of endowment funds managed for charitable organizations to support ongoing philanthropic activities.

Family Office Enhancements: Tax concessions for single family offices have been expanded regarding beneficial interests that qualified charities may hold in family-owned investment-holding vehicles. These measures make it substantially easier for wealth owners to direct resources to philanthropic causes while maintaining integrated wealth management structures.

Legislative Council Monitoring

In November 2024, the Legislative Council addressed questions regarding monitoring of charitable institutions, emphasizing enhanced oversight to ensure Section 88 charities maintain compliance with their charitable purposes and public benefit requirements. This reflects ongoing government commitment to maintaining the integrity of Hong Kong’s charitable sector while supporting legitimate philanthropic activity.

Hong Kong’s Unique Estate Planning Advantages

No Estate Duty or Inheritance Tax

Hong Kong abolished estate duty in 2006 and does not impose inheritance taxes. This creates exceptional opportunities for integrating charitable giving with estate planning without the complications present in jurisdictions with estate taxation.

The absence of estate duty means:

• No tax penalties for lifetime wealth accumulation
• Unrestricted transfer of assets to beneficiaries
• Greater flexibility in structuring charitable bequests
• Enhanced ability to create multi-generational philanthropic vehicles

Charitable Legacy Planning

High-net-worth individuals can establish charitable trusts or foundations that continue operating after death, creating lasting philanthropic legacies without estate tax erosion. Combined with lifetime charitable donation deductions, this framework enables comprehensive wealth transfer and philanthropic strategies.

Family offices increasingly utilize charitable structures to engage multiple generations in philanthropy, teaching values and stewardship while creating tax-efficient vehicles for wealth deployment.

Strategic Tax Planning with Charitable Giving

Optimizing the 35% Ceiling

The 35% deduction limit creates both opportunities and planning considerations. Donors with significant wealth should consider multi-year giving strategies to maximize tax efficiency:

Income Timing: In years with unusually high income, charitable donations up to 35% of that elevated income can provide substantial tax relief while supporting worthy causes.

Excess Contributions: Donations exceeding the 35% threshold receive no tax benefit and cannot be carried forward to future years. Strategic donors should plan giving amounts to remain within the ceiling while meeting philanthropic objectives.

Corporate-Individual Coordination: Business owners can strategically allocate charitable giving between corporate and personal donations to optimize overall tax efficiency across both individual and corporate tax positions.

Integration with Broader Tax Planning

Charitable giving should be integrated into comprehensive tax planning considering:

• Personal assessment elections to consolidate income sources
• Timing of income recognition and charitable contributions
• Corporate dividend policies and charitable giving programs
• Family wealth transfer strategies incorporating charitable components
• International tax positions for individuals with multi-jurisdictional exposure

Donor-Advised Funds and Giving Vehicles

While Hong Kong’s charitable framework differs from jurisdictions with established donor-advised fund structures, similar objectives can be achieved through properly structured charitable trusts or foundations. These vehicles allow donors to make contributions in high-income years while distributing funds to specific charitable causes over multiple years according to strategic philanthropic priorities.

International Perspective: Hong Kong in the Global Philanthropy Context

Regional Philanthropic Hub

According to 2024 McKinsey analysis, Hong Kong and Singapore collectively house approximately 15% of the world’s family offices. This concentration reflects the region’s tax efficiency, regulatory clarity, and mature financial ecosystems. Hong Kong’s specific advantages for philanthropy include:

• Robust legal framework for charitable organizations
• Absence of estate and inheritance taxes
• Competitive charitable donation deduction rates
• Political and economic stability
• Gateway to mainland China philanthropic opportunities
• Sophisticated professional services infrastructure

Cross-Border Philanthropy Considerations

Section 88 requirements stipulate that charitable profits must not be expended substantially outside Hong Kong. This creates important planning considerations for donors interested in international charitable work:

Hong Kong-Based Operations: Charities must maintain substantial Hong Kong operations and benefit Hong Kong communities to maintain Section 88 status and donor deductibility.

International Programs: Some international charitable work is permissible provided it does not constitute substantial expenditure outside Hong Kong. The IRD assesses this on a case-by-case basis.

Alternative Structures: Donors seeking to support international causes may need to contribute to Hong Kong Section 88 charities that conduct some international work, or make non-deductible contributions directly to overseas charities.

Practical Implementation: Case Studies

Case Study 1: High-Net-Worth Individual

Scenario: Mr. Chan, a senior executive, has assessable income of HKD 5,000,000 in year of assessment 2024/25. He is passionate about education and wishes to support local schools.

Strategy: Mr. Chan can donate up to HKD 1,750,000 (35% of HKD 5,000,000) to Section 88 approved educational charities and claim the full amount as a deduction. At the 17% standard rate, this generates tax savings of HKD 297,500.

Implementation: Mr. Chan identifies three educational charities through the IRD Section 88 database, allocates donations across the institutions, obtains proper receipts, and retains documentation for 6 years. He claims the deduction on his tax return filed in May 2025.

Case Study 2: Family Business Corporation

Scenario: ABC Limited, a profitable family business, generates assessable profits of HKD 10,000,000. The family wishes to establish an ongoing charitable giving program aligned with their corporate values.

Strategy: ABC Limited establishes an annual charitable giving budget of HKD 2,800,000 (28% of profits, within the 35% ceiling), supporting community development charities. This generates tax savings of HKD 462,000 annually at the 16.5% profits tax rate.

Implementation: The company implements formal giving policies, establishes relationships with Section 88 charities, integrates charitable giving into annual CSR reporting, and maintains comprehensive documentation for tax purposes.

Case Study 3: Multi-Generational Family Foundation

Scenario: The Wong family, spanning three generations, wishes to establish a lasting philanthropic legacy focused on poverty alleviation and healthcare.

Strategy: The family establishes a charitable trust applying for Section 88 status, with initial funding of HKD 50,000,000. Family members from all generations participate in governance, with annual distributions to approved charitable programs.

Implementation: Professional trustees manage investments and grant-making. The family obtains Section 88 approval after 8 months, enabling donors to claim deductions for contributions. The structure provides multi-generational engagement in philanthropy while creating tax-efficient giving vehicles.

Common Pitfalls and How to Avoid Them

Insufficient Documentation

Pitfall: Making cash donations without obtaining proper receipts, particularly in religious or community settings.

Solution: Always request and retain official receipts showing all required information. If making regular donations, establish systematic receipt collection and filing processes.

Donating to Non-Section 88 Organizations

Pitfall: Contributing to worthy causes that lack Section 88 status, resulting in non-deductible donations.

Solution: Verify Section 88 status through the IRD database before making contributions. Consider encouraging favored organizations to apply for Section 88 recognition if they qualify.

Exceeding the 35% Ceiling

Pitfall: Making donations exceeding 35% of assessable income without realizing excess amounts receive no tax benefit.

Solution: Calculate the 35% threshold before making significant donations. Consider spreading large contributions across multiple years to maximize tax efficiency.

Incorrect Tax Year Allocation

Pitfall: Claiming donations in the wrong year of assessment due to misunderstanding the tax year timing.

Solution: Remember that the tax year runs 1 April to 31 March. Donations made after 31 March are claimed in the following year’s tax return.

Quid Pro Quo Arrangements

Pitfall: Making “donations” that provide material benefits in return, such as purchasing goods or services at charity events.

Solution: Ensure donations constitute true gifts without receiving advantages of material character. Purchase transactions, even supporting charities, do not qualify as approved charitable donations.

The Future of Philanthropy in Hong Kong

Government Policy Direction

The Hong Kong SAR Government has articulated ambitions to position the city as a leading philanthropic hub in Asia. Recent initiatives including Impact Link, enhanced family office tax concessions, and expansions to the Unified Fund Exemption regime demonstrate policy commitment to facilitating charitable giving.

Growing Family Office Sector

With over 2,700 single family offices and continuing growth, Hong Kong’s philanthropic sector will likely see increased sophistication in charitable structures, greater integration of impact investing with traditional philanthropy, and enhanced multi-generational engagement in family giving programs.

Enhanced Regulatory Framework

Recent Legislative Council attention to charitable institution monitoring suggests evolving oversight to ensure Section 88 charities maintain high standards of governance, transparency, and public benefit delivery. This enhanced framework should strengthen public confidence while maintaining flexibility for legitimate charitable activity.

Conclusion

Hong Kong’s charitable giving framework offers exceptional advantages for individuals and corporations seeking to align philanthropic objectives with tax-efficient planning. The combination of generous 35% deduction limits, absence of estate duty, and robust legal frameworks creates unique opportunities unavailable in many jurisdictions.

Successful philanthropic tax planning requires understanding the technical requirements of Sections 26C, 16D, and 88, maintaining proper documentation, and integrating charitable giving into comprehensive wealth management strategies. Whether through direct donations, establishment of charitable trusts or foundations, or participation in family office philanthropic programs, Hong Kong provides the infrastructure and incentives to support meaningful charitable impact.

As Hong Kong continues developing its position as a regional philanthropic hub, donors who understand and leverage these advantages can maximize both their tax efficiency and their social impact, creating lasting legacies that benefit Hong Kong communities for generations to come.