In Hong Kong, “charitable foundations” are often referred to as “charitable foundations”. According to the Inland Revenue Ordinance, Chapter 112 of the Laws of Hong Kong, not all “voluntary” or so-called “non-profit-making” organizations are “charity organization”. To be “charity organization”, they must be established purely for legally recognized charitable purposes. Therefore, we must first understand the purpose of the establishment of the organization.
Charity organization must be established purely for charitable purposes. For any organisation or trust to be a charity, it must be established purely for charitable purposes recognised by the legal definition. According to the definition of “charitable body” given by Lord MacNaghten in Income Tax Special Purposes Commissioners v. Pemsel [1891-1894] All ER Rep 28, the following purposes may be regarded as having a “charitable character”:
(a) relief of poverty;
(b) the promotion of education;
(c) the promotion of religion; and
(d) other than the above, other purposes of a charitable character beneficial to the community.
(a) For the purpose of applying for tax exemption under Section 88 of the Inland Revenue Ordinance (“Section 88 Tax Exemption”), notwithstanding the purposes listed in (a) to (c) above, the relevant activities may be to be carried out anywhere, but the use under (d) above must be beneficial to the Hong Kong society to be considered charitable, such as:
o Environmental protection, can be combined with education
o Medical: such as sending masks to Po Leung Kuk
o Religious and political in nature (the establishment of such charity organization in China is not recommended)
(b) In general, the beneficiaries of a charity cannot be defined by personal relationships such as relatives or employment with the same employer, as in Re Compton  Ch 123 and Oppenheim v Tobacco Securities Trust Co Ltd  AC 297 described.
Types of Charity Organization
In Hong Kong, the most common types of organizations are:
(a) a trust body;
(b) societies established under the Societies Ordinance (Cap 151), excluding unincorporated trusts of a public character established solely for charitable purposes;
(c) a corporation (usually a company limited by guarantee) registered under the Companies Ordinance (Cap. 622); and
(d) a body established under the laws of Hong Kong.
Each method of setting up a charity has its differences, which we discuss below:
(a) Charitable societies
According to section 2 of the Societies Ordinance, Chapter 151 of the Laws of Hong Kong (the “Society Ordinance”), “society” means: “Any club, company, partnership or organization of more than one person, whatever the nature or purpose, to which the provisions of this Ordinance apply. “. Pursuant to section 2(2) of the Societies Ordinance, the provisions of the Societies Ordinance do not apply to persons listed in the Schedule. In simple terms, they are companies, trade unions, credit unions, etc.
The application form for the establishment of a society can be downloaded from the Police Licensing Office website². All societies must apply to the Societies Officer for registration within 1 month of their establishment. The application must be signed by 3 officers and must include the following details:
o Copy of Hong Kong Identity Card or other valid identification document;
o Documents proving the place of business of the society;
o Consent letter of the legal occupier of the premises and a clear copy of Hong Kong Identity Card or other valid identification document (if applicable);
o Society bylaws, articles of association or minutes of meetings showing the purpose or purpose of the society;
o Documentary proof of the officer’s qualifications (if any, e.g. certificate); and
o Association Name Consent Form (if applicable).
Registered as a society from the police headquarters, most of them are non-profit civil organizations, not legal entities. When applying for registration, you need to provide information on at least 3 officers, which can be the chairman, vice-chairman, treasurer, secretary, etc. Societies are relatively flexible because they do not have a specific set of rules governing their inner workings. Society members are free to set their own rules. Societies have no specific continuing responsibilities and are not required to submit any annual returns or other documents to the Societies Officer.
There is no fee to apply for registration as a society. If the association does not operate a business, a business registration certificate is not required, so no annual fee is required, no audited financial statements are required to be filed every year, and therefore no fee is required to be paid to an accountant.
(b) Corporation (limited by guarantee)
Usually customers want to set up a charitable fund, which means to register as a corporation under the Companies Ordinance, Chapter 622 of the Laws of Hong Kong, usually a company limited by guarantee.
The establishment procedure of this kind of institution is more complicated than the previous two, but its advantage is that it has an independent legal status, and the registered members bear limited debts. A charitable organization established under this is a separate legal entity from the members of the company and can protect the personal assets of the members. In the event of a charity closing down or failing to meet its obligations, its liability is limited to the guaranteed amount agreed upon at establishment.
(c) Charitable trusts
A more flexible way than a company limited by guarantee is to set up a charitable trust, but there are very few institutions that are truly capable of providing charitable trust services.
Trusts established for purely charitable purposes: Ip Cheung Kwok v Ip Siu Bun  1 HKC 437. The instrument of a trust must accurately and clearly state the purpose or purpose for which the institution or trust was established. Otherwise, it will not be recognized as a charity by the tax office.
A trust is a legal arrangement whereby the founder of the trust transfers the assets held by the trust founder to a trustee (usually a professional trust company), who holds and administers the assets for the founder and/or other designated beneficiaries according to the wishes of the founder.
The founder and the trustee will jointly formulate and sign the trust deed. The terms and conditions of the trust deed stipulate that the trust assets will be held by the trustee. manage and distribute the trust assets locally.
The founder may also, with the consent of the trustee, make relative distributions or arrangements for the assets in the trust. After the founder dies, the trustee will manage the trust assets with reference to the letter of will before the founder’s life. If the founder wants to retain the right to invest in the trust assets, he can designate himself or another person as the investment manager when the trust is established, and make investment decisions directly on the trust assets.
In addition to the above categories, it is also possible to form a group of recognized charity organization hong kong. Pursuant to section 2 of the Inland Revenue Ordinance, an authorized charity is a charitable institution or trust of a public character exempt from tax under section 88 for charitable purposes, or money donated to the Government for charitable purposes.
If successfully recognised as a charity organization hong kong, the company will be included in the “List of Charity organization and Charitable Trusts Exempted from Taxation” under Section 88 of the Inland Revenue Ordinance, and the general public can check whether their donations can be claimed for deduction when filing tax returns. (See the follow-up article for details)