Press Release



IRD on granting of tax exemption status


In response to the media enquiries on the granting of tax exemption status to charitable institutions, a spokesman for the Inland Revenue Department (IRD) today (February 5) wishes to make the following statement:

In accordance with Section 88 of the Inland Revenue Ordinance (IRO), charitable institutions or trusts of a public character are exempt from tax provided that they are established exclusively for charitable purposes and their activities are primarily for carrying out their expressed objectives. What constitutes a charity capable to claim tax exemption, how a charity may apply for tax exemption and how the applications are processed by the IRD are clearly explained in an information pamphlet entitled "A Tax Guide for Charitable Institutions and Trusts of a Public Character" (published for general information as early as in 1980's). This tax guide can also be downloaded from the IRD website ( It has been clearly stated in Appendix A of this guide that "attainment of a political object" is one example of purposes which the courts had held to be non-charitable purposes.

There have been clearly established principles and criteria for granting of tax exemption status to eligible charitable institutions for revenue protection purpose. They have been broadly established and applied consistently since 1949 when the relevant law came into operation. The tax exemption status of each approved charitable institution is also subject to review once every few (currently four) years. There has not been any change or departure from the practice ever since. A charity can only maintain the status if its activities are carried out directly to further its objects or entirely ancillary to the achievement of those objects. If an approved charitable institution is found to have engaged in other activities during the periodical review of tax exemption status conducted by the IRD, it will be requested to clarify if those activities are compatible with its charitable objects.

Upon enquiry by the IRD, an approved charitable institution has within a specified period of time (usually one month) to respond and furnish reply to clarify the situation. On receipt of the reply from the organization concerned, the IRD will go over the reasons or explanations and make a decision. Usually, the department will advise the organization concerned to take remedial measures should it wish to maintain its tax exemption status. Indeed, there are tax appeal channels and judicial means for those organizations which do not agree with IRD's decisions which are made strictly for implementing the provisions under the IRO.

If a recognized charity engaged in activities that might be described as of a "political" nature, the IRD will draw the charity's attention to the guidelines laid down in the Report of Charity Commissioners for England and Wales. Principal court decisions in the UK have established that: -

(a) the attainment of political object is not charitable;

(b) the expression "political purposes" is not confined to party politics but includes the promotion of any change in the law;

(c) to promote the maintenance of the existing law, or a particular line of political administration and policy, is also a political purpose;

(d) although an association for promoting some change in law cannot itself be a charity, an organization would not necessarily lose its rights to be considered a charity if, as a matter of construction, the promotion of legislation were one among other lawful purposes ancillary to good charitable purposes: it is a question of degree.

When seeking clarification from the charity, the IRD's concern is to ascertain whether such activities were carried out de facto in furtherance of its charitable purposes. In considering the issue, IRD will not take into account whether the activities are in support of or against the Government. The IRD accords the same treatment to all charitable organizations irrespective of the objects they promote (i.e. whether religious, educational or other charitable causes). In recent years, the IRD has sought information on activities carried out by the approved charitable institutions in the following number of review cases:-

Year of Assessment No. of cases reviewed

1992 - 1993 513

1993 - 1994 412

1994 - 1995 379

1995 - 1996 475

1996 - 1997 516

1997 - 1998 526

1998 - 1999 474

1999 - 2000 579

A charitable organization would not necessarily lose its tax exemption status if it carried out political activities which may be regarded as in furtherance of its charitable objects. As at 31 January 2001, there are altogether 3,395 approved charitable institutions and trusts granted under Section 88 of the IRO. The number of approvals withdrawn during the year 1998/99, 1999/2000 and for period from 1 April 2000 to 31 January 2001 are 100, 59 and 48 respectively. None of these approvals withdrawn are for the reason that the institutions had engaged in political activities which are not charitable. The secrecy provision prohibits the IRD from revealing details on individual cases.

End/Monday, February 5, 2001