For Hong Kong charities and NGOs, a recognition under Section 88 of the Inland Revenue Ordinance (IRO) is extremely important. It gives you an exemption from tax and raises your credibility with both donors and regulators.
In this article, we will explain what Section 88 tax exemption is, who qualifies, and how to make a claim. We will also illustrate how FastLane HR can help you at every step.
What is Section 88?
Under Section 88 of the Inland Revenue Ordinance (Cap. 112), your organization, as a recognized charity in Hong Kong, is exempt from Profits Tax and other taxation. Upon approval, your organization is legally considered a tax-exempt charity by the Hong Kong Inland Revenue Department (IRD).
Benefits of Section 88 Status:
- No profit tax at all
- Tax-deductible donations for donors
- More trust and openness for collecting money
- Identification by organizations and companies
These organizations, such as non-profit organizations, churches, and educational charities, often apply for this status.
Who qualifies for the Section 88 Tax Exemption?
To be eligible for a Section 88 tax exemption in Hong Kong, your organization must:
Work exclusively for philanthropic reasons, e.g.:
- Relief of poverty
- Improvement of education
- Promotion of religion
- Other uses that serve the public
Not be operated for profit—profits must be re-invested in charity.
Promote open government and sound accounting principles.
Eligibility does not depend on your company structure alone (e.g., being a company limited by guarantee), but on the purpose, activities, and financial structure of the overall organization.
What Do You Need to Qualify?
Inland Revenue Department considers your application in relation to a few major guidelines. You will need to prepare and provide:
A governing document or constitution that states your charity’s purposes.
- Observations that your group
– Does not distribute profits to members.
- Only spends money on helping others.
- Complete work and task descriptions
- Audited financial statements or well-maintained accounting records
- Details of management personnel, e.g., a board of directors or trustees.
Even once approved, yearly compliance is required to maintain tax-exempt status.
How to Apply for Section 88 Tax Exemption
Applying for Section 88 status is a multi-step process. Here’s a simplified overview:
- Write to the IRD explaining what you need.
- Submit supporting documents, including:
- Business registration certificate
- Articles of Association or Trust Deed
- Previous and recommended activities list
- Money accounts or budgeted accounts
- IRD can ask further clarifications or documents.
- Await official written confirmation of Section 88 recognition.
Timeline:
Approval can be from 2 to 6 months. This depends on the complexity of your case and how comprehensive your documents are.
Prevent These Typical Errors
Getting a Section 88 tax exemption is simple with the right guidance, yet most organizations get rejected because of:
- Confused or discordant philanthropic objectives
- Poor bookkeeping or ambiguous financial data
- Presenting an incomplete set of documents
- Not showing benefits to the public
These risks can easily be prevented with the assistance of professionals.
How FastLane HR Can Help You
At FastLane HR, we are experts in helping organizations obtain and retain their Section 88 tax-exempt status. Our seasoned personnel can:
- Check and prepare all documents needed
- Advise on accounting and governance standards
- Represent you to the IRD.
- Offer ongoing financial reporting and tax return services
If you are forming a new charity or attempting to legalize an existing one, we can assist you in complying with the rules and saving on taxes.
Section 88 Tax Exemption in Hong Kong Questions and Answers
Can I submit an application for Section 88 if my organization is not registered?
You need a formal constitution, e.g., a company limited by guarantee or a trust, before applying.
How long does approval take?
Typically 2–6 months, subject to complexity and response time of IRD.
Section 88 solely for NGOs?
No, religious, educational, and other charitable institutions may also qualify.
What happens after approval?
You need to keep good records and keep working towards your charity goals.
Conclusion
FastLane HR is just a click away. It may be complex to navigate the Section 88 tax exemption, and you don’t have to do so by yourself. FastLane HR provides expert support to help your application be accurate, complete, and compliant with Hong Kong tax laws.
Contact us today for a complimentary consultation and begin shaping the financial future of your charity.