Many Hong Kong businesses have come to see corporate giving as
an important activity, and as a key component of their
corporate social responsibility activities.
While for some businesses it will be satisfactory for their
giving to be directly to philanthropic causes, many businesses,
particularly larger companies, will wish to form their own
private charitable foundations, and to fund all giving through that
Rationale for a company forming its own charity
There are a number of benefits to a company in the formation
of its own charitable foundation:
With a company charitable foundation, a company's staff
can be involved in its management and administration.
This allows for staff to be fully engaged in the projects and
the charitable giving.
The formation and funding of a charitable foundation can be
used in the company's CSR material. The causes supported
by the charitable foundation can be monitored to ensure that these
are appropriate and will not cause reputational harm to the
The timing of direct giving can be difficult as causes may not
be readily identifiable; also, profits can fluctuate.
A company charitable foundation can hold, invest and
accumulate funds while projects are being identified.
With retained funds, the foundation will be able to support
projects as and when need arises (for example, responding
to natural disasters and emergencies).
A charitable foundation can accumulate reserves. This can
allow a company to continue its charitable giving
strategy even in years in which profits are lower than
(e) Tax relief
If a Hong Kong charity is formed, a Hong Kong corporate donor
would obtain relief from Hong Kong Profits Tax. A business
donor can claim a deduction for the aggregate of its approved
charitable gifts of up to 35% of its taxable profits. In
practice, a business may quickly cover the costs of forming its own
charity through the tax relief it obtains when it comes to
make gifts. If employees give to the charity, they will also obtain
Formation of a Hong Kong charitable foundation
Hong Kong law allows for a wide definition of charitable
purpose: activities relating to health and education and which are
socially beneficial may be considered charitable. In most
cases, a Hong Kong charity can support causes outside of Hong Kong
if that is desired.
A preliminary issue to be determined is whether a charitable
foundation should be formed as a trust or a company. Either
structure is possible, with the choice depending on a number
of factors such as the activities to be undertaken:
(a) use of a company might be consistent with the governance
mechanism of a corporate donor, with the board of directors
concept facilitating proper management of a charity; while
(b) a trust might be appropriate with a professional trustee
involved to help safeguard the charity's assets.
With both types of vehicles, governance and operating
arrangements need to be considered in the preparation of the
Once the charity has been formed, an application to the Hong
Kong Inland Revenue Department for tax exempt status would
be made. While this application is being made, practical steps
can be taken such as the opening of bank accounts and initial
meetings of the board.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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