Protect Your s.88 Exemption — and Your Donors' Deductions
A Section 88 tax exemption is not permanent. Commercial activities, improper distribution of funds, and governance failures can trigger IRD review and retroactive revocation. Our specialist charity tax team helps you apply, maintain, and defend your exempt status — so every dollar stays focused on your charitable mission.
Charity & NGO Tax Specialist
A Section 88 tax exemption is not permanent. Commercial activities, improper distribution of funds, and governance failures can trigger IRD review and retroactive revocation. Our specialist charity tax team helps you apply, maintain, and defend your exempt status — so every dollar stays focused on your charitable mission.
⚠ A s.88 Exemption Can Be Revoked — and IRD Can Recover Tax Retroactively
Many charities assume that once s.88 exempt status is granted, it is permanent. It is not. The IRD can and does conduct periodic reviews of charitable organisations, and if it determines the organisation has engaged in substantial commercial activities, failed to apply funds exclusively for charitable purposes, or altered its objects without notification, it may revoke the exemption — and assess profits tax for all prior years within the 6-year limitation period.
您是否正面對以下稅務問題？
Commercial Activities Contaminating Exempt Status
Running a cafe, retail shop, or consultancy as "income generation" can constitute a trade. Without formal ring-fencing into a separate trading subsidiary, the IRD may challenge the entire organisation's exempt status.
Failure to Submit Annual Returns and Accounts
Exempt charities must still file financial statements with the IRD on request. Repeated failures to produce accounts or accounts showing significant undisclosed commercial income can trigger a full exemption review.
Objects Drift — Activities No Longer Match Approved Objects
If activities diverge significantly from the objects approved by the IRD for s.88 purposes — without notification and re-approval — the IRD may revoke the exemption from the date the drift commenced.
Related Party Transactions at Non-Arm's-Length Rates
Payments to trustees, founders, or related entities at above-market rates or loans to related parties can constitute distribution for non-charitable purposes — a primary ground for revocation.
適合對象
Seeking initial s.88 exemption; structuring objects to satisfy the legal test for charitable purposes under HK common law.
Managing complex income streams — tuition, grants, endowment income, commercial partnerships — within s.88 constraints.
Fee-for-service activities alongside grant-funded charitable work; understanding which income streams are exempt.
Cafes, retail stores, training academies — ring-fencing commercial income into a taxable subsidiary to protect parent exemption.
Companies establishing charitable foundations for CSR giving; ensuring s.88 qualification and corporate donation deductibility.
服務範疇
s.88 IRO Exemption Application
End-to-end preparation and submission: constitutional document review, charitable objects analysis under HK common law, and management of all IRD correspondence.
Commercial Activity Ring-Fencing
Structuring commercial activities into a separate taxable trading subsidiary owned by the charity, keeping the parent's s.88 status clean.
Donor Deductibility Optimisation (s.26C)
Ensuring donor deductions under s.26C (up to 35% of assessable income) are maximised and properly documented.
Annual Exempt Status Health Check
Annual review of activities, income streams, and governance against IRD published criteria for s.88 compliance.
IRD Exemption Review Defence
Representation under active IRD review, including factual and legal arguments for continued exempt status and Board of Review appeal if needed.
簡單、高效、專業
Charitable Objects & Governance Review
Review constitutional documents against IRD DIPN 45 criteria and the four heads of charitable purpose under HK common law. Recommend precise re-drafting where needed.
Week 1–2s.88 Application Preparation & Submission
Prepare the application demonstrating exclusively charitable objects and no private benefit, with supporting exhibits and case law references.
Week 2–6IRD Query Management
Respond to all IRD queries promptly with substantive legal arguments. For complex or borderline cases, this phase requires detailed advocacy.
Month 2–6Compliance Programme & Annual Health Check
Post-exemption compliance calendar: annual financial statement review, commercial activity monitoring, governance training, and proactive notification protocols.
Ongoing為真實客戶帶來真實成果
Community Welfare Charity — Cafe Ring-Fencing
- Charity operating a cafe generating HK.7M annual revenue triggered IRD preliminary queries
- Restructured cafe into wholly-owned trading subsidiary paying 8.25%/16.5% profits tax
- Parent s.88 status confirmed unaffected; HKM annual donor deductibility preserved
Social Enterprise — s.88 Granted on Third Attempt
- Two prior s.88 applications independently rejected by the IRD
- Restructured constitutional objects, removed commercial training arm, added public benefit memorandum
- IRD granted s.88 with effect from date of incorporation — 4 years of accumulated tax exposure eliminated
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