LCQ19: Regulating charitable organisations
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Question:
Regarding the continued concerns over the transparency and accountability of charitable organisations in society, will the Government inform this Council:
(1) of the respective numbers of tax-exempt charitable organisations, as well as institutions newly exempted and those whose exemption status had been withdrawn under section 88 of the Inland Revenue Ordinance (Cap. 112) in each of the past five financial years; among cases whose exemption status was withdrawn, of the major reasons involved (e.g. incompatible with the charitable purpose, cessation of operation, accounting issues) and, among which, the number of institutions whose exemption status has been withdrawn due to failure to pass the regular reviews;
(2) other than the Tax Guide for Charitable Institutions and Trusts of a Public Character currently published on the website of the Inland Revenue Department (IRD), whether the IRD has compiled a separate and more detailed internal reference document and consolidated the principles for determining "charitable nature" and "public interests" as illustrated in the relevant case laws; if it has, whether it will consider further consolidating the relevant principles into more detailed administrative guidelines or practical explanations and make them available to the public, so that applicant institutions and members of the public may have a clearer understanding of the relevant criteria;
(3) given that the Law Reform Commission (LRC) pointed out in its Report on Charities published in December 2013 that solely relying on case law rather than a clear statutory definition of what constitutes "charitable purpose" might affect the clarity of the law, has the IRD encountered any questions of interpretation arising from different case laws during its regular reviews of exempted institutions; if it has, how it will follow up and address the issues;
(4) given that it has been more than 12 years since the LRC Report on Charities was published, and upon gaining experience from the implementation of the existing administrative measures, has the Government conducted any internal discussion or preliminary studies regarding the "charity commission" proposed by the said Report; whether it will consider consulting stakeholders on the pros and cons of different modes of regulation for charitable organisations in due course, with a view to exploring the feasibility of improving the frameworks of the relevant legislation in the long run;
(5) given that the Audit Commission pointed out in paragraph 1.4 of its Report No. 68 published in April 2017 that the Social Welfare Department (SWD), the Home Affairs Department (HAD) and the Food and Environmental Hygiene Department (FEHD) have respectively regulated different types of charitable fundraising activities held in public places, and that paragraph 5.7 of the said Report pointed out that the SWD and the HAD have imposed audit and submission conditions on the accounts of fundraising activities, while the FEHD has merely imposed similar requirements on institutions which are granted a relatively large number of licences each year, whether the authorities will study and gradually standardise the relevant regulatory standards, including requiring all charitable fundraising activities involving public places to submit audited accounts, and formulating clearer disclosure requirements regarding the use of donations and fundraising expenses; if so, of the details and timetable; if not, the reasons for that; and
(6) to further enhance transparency and public monitoring, whether the authorities will establish an inter-departmental central information platform for charitable organisations and consolidate information such as basic data, exemption status, licences and audited accounts of such organisations which are currently scattered across various departments, so as to facilitate public access; if so, of the details and timetable; if not, the reasons for that?
Reply:
President,
In consultation with the Environment and Ecology Bureau, the Financial Services and the Treasury Bureau, and the Labour and Welfare Bureau, I, on behalf of the Government, now give a reply to the various parts of the question raised by Professor the Hon Alex Fan as follows:
(1) Charities are exempted from tax if they meet the conditions stipulated in section 88 of the Inland Revenue Ordinance (Cap. 112) (IRO), i.e. (i) the profits are applied solely for charitable purposes; (ii) the profits are not expended substantially outside Hong Kong; and (iii) either the trade or business is exercised in the course of the actual carrying out of the expressed objects of the charity, or the work in connection with the trade or business is mainly carried on by persons for whose benefit the charity is established.
In the past five financial years, the total number of tax-exempt charities, as well as charities newly exempted from paying tax and those with tax exemption status withdrawn by the Inland Revenue Department (IRD) are set out below:
| Financial year (as at March 31) |
Number of tax-exempt charities |
Number of charities newly exempted from paying tax | Number of charities with tax exemption status withdrawn |
| 2021/22 | 9709 | 446 | 222 |
| 2022/23 | 10042 | 532 | 240 |
| 2023/24 | 10516 | 649 | 221 |
| 2024/25 | 10849 | 584 | 285 |
| 2025/26 | 11079 | 412 | 205 |
In the past five financial years, the number of charities with tax exemption status withdrawn by the IRD and the reasons for withdrawals are as follows:
| Financial year (as at March 31) |
Number of charities with tax exemption status withdrawn | Reasons for charities with tax exemption status withdrawn | |||
| (i) Dissolved or wound up |
(ii) Ceased operation or became dormant |
(iii) No response to the IRD's enquiries or untraceable |
(iv) No longer qualified for the status of a charitable institution or trust of a public character |
||
| 2021/22 | 222 | 121 | 8 | 92 | 1 |
| 2022/23 | 240 | 135 | 15 | 89 | 1 |
| 2023/24 | 221 | 108 | 18 | 90 | 5 |
| 2024/25 | 285 | 144 | 27 | 111 | 3 |
| 2025/26 | 205 | 106 | 24 | 74 | 1 |
The IRD does not maintain breakdown on the number of charities with tax exemption status withdrawn for failing regular reviews.
(2) and (3) In processing applications for tax exemption under section 88 of the IRO, the IRD has been making reference to the relevant common law cases to determine whether the applicant is a charity at law, and whether the organisation is established for public benefit. The IRD regularly reviews the tax-exempt charities to ascertain whether their objects are still of charitable nature and whether the activities are compatible with their stated objects. Each case is considered on its own merits, having regard to the facts and circumstance of the particular case. The IRD will also update the Tax Guide for Charitable Institutions and Trusts of a Public Character from time to time to provide clear guidance to the applicants and the public.
The IRD has not encountered interpretation issues arising from applying the relevant common law cases when conducting regular reviews of tax-exempt charities.
(4) With reference to the recommendations in the Law Reform Commission (LRC) Report on Charities published in December 2013, the relevant Audit Report and the Public Accounts Committee (PAC) Report, the Government has, since 2018, introduced and implemented a series of administrative measures in phases with a view to further enhancing the transparency and accountability of charitable fund-raising activities. Such measures include uploading all audited accounts submitted by organisations which obtained approval to organise charitable fund-raising activities to the fund-raising activities page on GovHK for reference by the public; issuing the new Good Practice Guide on Charitable Fund-raising (Good Practice Guide) for charitable organisations' adoption, and setting up a dedicated hotline for handling enquiries or complaints in relation to charitable fund-raising activities held by organisations in public places, etc.
As regards the suggestion to establish a charity commission, the LRC stated in its final report that the public consultation conducted in 2011 reflected that there was clearly no broad consensus across the community on whether such a commission should be established in future. Taking into account the polarised views and concerns expressed by the public and stakeholders during the consultation period, the LRC ultimately recommended that a charity commission should not be established at that time. On the other hand, since the legislation and monitoring in relation to charitable organisations involve different bureaux and departments, and that the establishment of a dedicated department or organisation as the regulator of charitable organisations would have significant implications on the definition and operation of charitable organisations in Hong Kong, the Government needs to examine the recommendation thoroughly and carefully, and will continue to keep under review its suitability and implementation timing.
(5) At present, charitable organisations which wish to conduct fund-raising activities in public places are required, having regard to the nature and specific circumstances of the activities, to apply for relevant permits or licences from the Food and Environmental Hygiene Department (FEHD), the Social Welfare Department (SWD) and/or the Home Affairs Department. Relevant government departments regulate different types of charitable fund-raising activities conducted in public places in accordance with their respective purviews, and impose corresponding licensing conditions having regard to the nature of the charitable fund-raising permit or licence concerned, such as requiring the submission of an income and expenditure statement and an auditor's report duly prepared and certified by a professional accountant.
The FEHD issues temporary hawker licences for charitable fund-raising activities involving on-street selling to ensure that such activities are conducted in a hygienic manner and will not cause obstruction. Licensees are permitted to conduct such sales for fund-raising purposes only at specified times and locations, and for no more than five days within two consecutive weeks. These fund-raising activities are comparatively small in scale, and involve actual commodities transactions for which donors are not eligible for tax deduction. In light of the recommendations of the Audit Commission and the PAC, and having regard to the guidelines issued by the SWD, as well as the nature, scale and duration of the fund-raising activities, proportionality of the requirements to the actual circumstances, etc, the FEHD has introduced appropriate new licensing conditions and administrative measures in 2018 regarding the safekeeping of funds collected, financial accountability and disclosure of the fund-raising purpose.
(6) To enhance the transparency of information provided by the charitable organisations and to facilitate public access, the Government has, since 2018, strengthened the consolidation of information held by various departments in relation to charitable fund-raising activities and uploaded it onto the dedicated fund-raising activities page on GovHK. Apart from enabling the public to inspect the audited accounts submitted by organisations which obtained approval to organise charitable fund-raising activities, the webpage also allows public access to information on different types of approved fund-raising activities. It also contains the Good Practice Guide and practical information provided by various departments for organisations intending to conduct charitable activities to draw reference.
Ends/Wednesday, July 8, 2026
Issued at HKT 14:22
Issued at HKT 14:22
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