Hong Kong’s infrastructure is advanced and completely modern. This, coupled with its unique geographical location and industrial spirit, has firmly established its reputation as Asia’s leading commercial, financial, legal, and logistics centre. There is no better place to be as China continues to expand trade with the west, providing lucrative opportunities for both sides of the equation. It is important to understand how the IRD defines a Charity in Hong Kong, and be aware of the various options for starting a Charity, as well as their key requirements. In order to be considered a Charity, the organization must fulfill a charitable purpose, as specified by the IRD. Purposes deemed charitable by the IRD are classified into four headings:
- Relief of poverty;
- Advancement of education;
- Advancement of religion;
- Other purposes of a charitable nature that are of benefit to the Hong Kong community.
Organizations seeking to set up a charity in Hong Kong have several options with regards to forming a structure for the organization. The most common types of structures are:
- A society established under the Societies Ordinance (Cap. 151);
- A company limited by guarantee incorporated under the Companies Ordinance (Cap. 622);
- A statutory body established by the Hong Kong legislature.
Of the four most common structures, the most popular and conventional route is to establish a Charity as a company limited by guarantee. One of the key advantages of this route is that the Charity is a separate legal entity from its members. This protects the personal finances of the members of the company, and their liability would be limited to the sum that they agree to contribute (“guarantee”) toward the charity’s assets in the event of its closure or when it is unable to meet its obligation. Companies limited by guarantee are currently the most popular type of charitable organization in Hong Kong recognized by the IRD as tax-exempt Charities.