HONG KONG SAR, CHINA Law and Practice Contributed by: Jeffrey Lee, Jessica Leung and Hilary Leung, Charles Russell Speechlys
10.2 Common Charitable Structures The most common types of structures used by private individuals and organisations for charitable planning are companies limited by guarantee and societies; trusts are also increasingly common. Company Limited by Guarantee A company limited by guarantee is quick, simple and inexpensive to set up. It is a separate legal entity, and the legal liability of members is limited to the amount of their contributions. The general compliance require - ments include holding annual general meetings, filing annual returns to the Companies Registry, preparing audited financial statements, etc. Society A society is also quick, simple and inexpensive to set up and run, but it has no separate legal status and members are personally liable if the assets are not sufficient to meet the liabilities. It is not subject to the general compliance requirements for a company, as mentioned. Trust A trust is generally more expensive and takes more time to set up and run if it is going to be managed by a professional trustee. It may be able to afford more pri - vacy for the founder and the assets in the trust fund. Trustees can be personally liable, although it is pos - sible to limit their liabilities subject to the restrictions in the Trustee Ordinance.
For the purpose of profits tax, the profits derived from any trade or business carried on by a charity are exempted if: • the profits are applied solely for qualifying charita - ble purposes; • the profits are not expended substantially outside Hong Kong; and • 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 such charity is estab - lished. A donor can be granted deductions for the purposes of personal assessment, salaries tax and profits tax for money donated to charities. Generally, stamp duty will not be chargeable on any conveyance of immovable property or any transfer of Hong Kong stock where such assets are donated to charities. Any organisation wishing to seek exemption from tax as a charity will need to apply to the IRD to obtain the tax exemption status.
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