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Non-Profit Organization in Hong Kong: The Complete Guide

Have you ever wondered how professional business leaders had turned their charitable goals into non-profit organizations in Hong Kong? The process may not be as hard as you think. Company registration in Hong Kong is an easy and quick process, and it also applies to non-profit organizations and foundations.

Why Entrepreneurs Opt For Non-Profit Organizations?

Non-profit organizations work with the aim to offer services, knowledge, or research in order to benefit the general public or broader community with the help of the organization’s funds.

In fact, these non-profit organizations don’t keep their profits, instead, they opt to re-invest the funds into programs, services, or research. That’s why business owners of these organizations experience various advantages in the business world.

Non-Profit Organization in Hong Kong

Perhaps the most well-known advantage is becoming eligible for tax exemption, and there are many others that are equally beneficial.

These advantages include:

  • The satisfaction of helping people.
  • Legal Entity
  • The eligibility of public and private grants.
  • Limited Liability

If you are interested in investing in non-profit organizations, regardless of its charity purpose, it is always advisable to dive deeper into the details, and know the difference between a charity and a non-profit making business.

Charity or Non-Profit Organizations in Hong Kong

A non-profit organization is primarily based on the concept that none of the business’s net profit from membership fees, research, donations or any kind of business activities will benefit any individual.

There are various types of non-profit organizations in Hong Kong which you can choose to incorporate. But not all non-profit organizations are considered to be charities or functions. Many clubs, homeownership associations, and other various organizations are nonprofits organizations.

These types of organizations are formed as mutual benefit nonprofit corporations, as they do not benefit the general public. Those nonprofits that do benefit the general public are typically the best-known type of nonprofit or charitable organizations.

Charitable institutions or non-profit organizations can be used to provide assistance and aid in many sectors such as healthcare or education. These voluntary or non-profit organizations must qualify as a charity to benefit from a tax exemption from the Hong Kong Inland Revenue Department (IRD).

How to define a Charity?

A charity is not equivalent to a non-profit organization including voluntary organizations, non-governmental organization (NGO) and trusts. It is a non-profit whose aim is to benefit the general public.

Therefore, charities must be a non-profit making organization. The goal of the charity is to improve the quality of life for the community.

Here are some organizations which are considered as a charity in Hong Kong.

  • Educational organizations
  • Churches or associations of churches.
  • Organizations that provide support for universities or colleges.
  • Hospitals and medical research organizations.
  • Governmental units.

Irrespective of the purpose of your non-profit, a qualified charitable organization is a specific type of organization which must be registered with the Inland Revenue Department.

What are the Categories of Charitable Organizations?

Now that you have a better idea about the charity and non-profit organizations in Hong Kong, the next thing that all entrepreneurs and professional business owners should know are the categories of charitable organizations. Charitable purposes are classified into four areas:

  • Advancement of religion
  • Relief of poverty
  • Improvement of education
  • Other purposes of a charitable nature beneficial to the Hong Kong community.

In fact, every case of charitable organizations is considered on their own merits. In order to lay down a precise definition of what constitutes a sufficient section of the public is quite tricky.

Entrepreneurs who are considering to set up non-profit organizations in Hong Kong are advised to seek legal advice about the sufficiency of the charity’s governing instruments.

It is mandatory for Charitable organizations to have a written governing instrument. More importantly, the type of instrument adopted by the business owners will depend on the particular circumstances of the preference of the promoters or founders, and the charity proposed.

What are the suitable legal entities for non-profit organizations in Hong Kong?

The process of registration and incorporation of a business entity in the Hong Kong is quite easy and straightforward. Most non-profit organizations and charities in Hong Kong opt for incorporation of a Hong Kong Limited Company as a vehicle of their organization under the Companies Ordinance.

The rationale behind this trend is to form a limited liability company in Hong Kong to protect the business people operating charitable or community projects from future liabilities, debts and legal risks of the organization.

And the businesses which are incorporated as a company limited by guarantee can serve this purpose more comfortably. Many business owners opt for this type of company for the benefits associated with it.

Companies which are incorporated as limited by guarantee do not involve share capitals and are not required to have a shareholder for their business entity. The controlling members of the business entity do not need to share the profits of the company, and thus the profits are retained within the organization.

Along with this, the member’s liability is restricted to the amount that the members undertake to contribute to the assets of the business entity and generally this amount is small. For instance, HK$10 or HK$100.

NGO Hong Kong

How to Set Up a Non-Profit Organization in Hong Kong?

A charity or non-profit organizations in Hong Kong can be established in the form of a trust. And investors can also open a company at the same time in Hong Kong. Investors who are considering to establish a company for charitable purposes instead of a fund, their legal status in Hong Kong will be that of a limited liability company.

As per the Companies Ordinance under Inland Revenue Department, legal business entities which qualify as charities or non-profit organizations in Hong Kong are usually exempt from taxation. So, Hong Kong companies deemed as charitable institutions will benefit from a profits tax exemption, and the profits obtained will be solely used for philanthropic purposes.

Setting up a non-profit organization as a company limited by guarantee needs to follow a few necessary steps. More importantly, the whole process should take around five working days to get the company registered. The first and foremost step for registering a non-profit organization in Hong Kong is to pay an agency fee and choose a name without the word “Limited” for your business entity.

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In addition to this, make sure that you must have at least two directors, a company secretary, one founder member, and a registered office address to stay compliant with the law.

All the directors of your business entity should be a natural person, and they cannot be corporate. But the members can be either individuals or corporations, as per your company requirements. There is no restriction on the resident status of any nationality of either shareholders or directors.

After selection the company name, registration fee, and choosing the business structure, all entrepreneurs are required to submit the following documents with the CR.

  • A questionnaire with standard questions such as your address
  • A copy of an official certificate as a proof of your residency
  • A photocopy of your passport
  • Name of the shareholders, directors, and company secretary.
  • A copy of the Articles of Association
  • Responsibilities and Obligations of Directors and Shareholders

Once all the documents have been received, the process will start to incorporate your company. After it is incorporated, you will receive the official documents stating your company as officially incorporated.

If you are willing to set up your non-profit organization as a Society under the Societies Ordinance, then you can with the Societies Office of the Societies Office of Hong Kong Police Force. So, whether a non-profit organization registers as a Society or Company, it must also have a Business Registration with the Inland Revenue Department.

How Can Startupr Help you for Setting up a Non-Profit Organization in Hong Kong?

In order to set up a non-profit organization in Hong Kong, you need to pay an annual registration fee to the Inland Revenue Department and to file an Annual Return to the Companies Registry (“CR”). Any changes to the company secretary registered office address, and directorship must be reported to the Company Registry.

But if you are still confused about the registration process for setting up a business and looking for more detailed information on the taxation system and setting up a non-profit organization in Hong Kong, then head to Startupr.