According to Section 14 of the Hong Kong Inland Revenue Ordinance, profits tax shall be charged for every person carrying on a trade, profession or business in Hong Kong in respect of his assessable profits derived from Hong Kong. Section 2 of the Hong Kong Inland Revenue Ordinance defines “person” to be included a corporation, partnership, trustee, whether incorporated or unincorporated, or body of persons. Body of persons means any body politic, corporate or collegiate and any company, fraternity, fellowship and society of persons whether corporate or not corporate.

Charitable institutions and trusts of a public character may be granted tax exemption under section 88 of the Hong Kong Inland Revenue Ordinance. Currently, there is no statutory definition of what constitutes a charity or a charitable purpose in Hong Kong. In handling charitable bodies and charitable purposes, the Inland Revenue Department has all along made reference to the cases in the common law as the determining criteria. According to past case law, charitable purposes include relief of poverty, advancement of education, advancement of religion and other purposes of charitable nature that are beneficial to the community.

Apart from the above criteria, according to the requirements under section 88 of the Inland Revenue Ordinance, charitable bodies carrying on trade or business have to comply with the following conditions in order to maintain their tax exemption status:

•	their trade or business shall serve to carry out the objects stated in their governing instruments, or such trade or business are mainly carried on by persons benefiting from such charitable purposes; and
•	the profits derived from such trade or business are solely used for charitable purposes and are expended substantially in Hong Kong.

For revenue protection, the Inland Revenue Department conducts from time to time reviews of tax-exempt charitable bodies. They would require charitable bodies to furnish account statements, financial reports, annual reports and any other information related to their activities, etc. to verify if they are still in compliance with the legal requirements.

Source：Hong Kong Inland Revenue Department’s website

- https://www.ird.gov.hk/eng/ppr/archives/12121201.htm