Our Partner Mathew Liu provided a full-day training course to senior property managers and officers on mediation in the contexts of water seepage and disputes in multi-storey buildings.
The training course was co-organized by the Department of Justice and the Food and Environmental Hygiene Department (FEHD), via the Joint Mediation Helpline Office, in promotion of the firm belief on the vital role of alternative dispute resolutions among neighbors.
This course was also one of the first property management training course after the implementation of new procedures for investigating water seepage in private buildings by the Joint Office by FEHD and the Buildings Department on 16 July 2026. The new procedures involves expedited investigation, wider use of technology and prosecution power. Property management companies, alongside owners and stakeholders, are keen on receiving regulatory, legal and expert support in this regard.
SFKS is experienced in advising on all ranges of property and land disputes, for instance, water seepage and leakage, building management, tenancy and conveyancing disputes.
SFKS is honoured to be named as Finalist in 7 categories of ALB Hong Kong Law Awards 2026 by Thomson Reuters.
- GBA Law Firm of the Year (Hong Kong)
- Real Estate Law Firm of the Year
- Private Wealth Law Firm of the Year
- Labour and Employment Law Firm of the Year
- Transportation and Logistics Law Firm of the Year
- Corporate Citizenship Law Firm of the Year
- Dispute Resolution Lawyer of the Year (Roy Leung,Managing Partner)
SFKS is deeply grateful for these nominations, and shall continue with our solemn pledge to serve clients respectfully, apply law professionally and render work effectively. We also congratulate all finalists and peers in the legal profession.
SFKS is pleased to announce a successful outcome for our client before the District Court in Tang Chau Ming v Tang Sze Yuen [2026] HKDC 1107. On 22 June 2026, Deputy District Judge Alfred Cheng dismissed the Plaintiff’s claims for defamation and malicious falsehood against our client, the Defendant.
The dispute arose from the management of a Chinese customary law family arrangement known as Yuen Pak Tso (元柏祖) (the “Tso”) and its land in Yuen Long. The Plaintiff, who served as the elected manager of the Tso, alleged that a “Meeting Summary” distributed by our client during an ancestral worship gathering contained defamatory words. In the Plaintiff’s case, the words in question suggested that the Plaintiff had breached his fiduciary duties and acted dishonestly by secretly renting out Tso land to his own sole proprietorship business, Heng Hing Development Co. The Plaintiff sought substantial damages and an injunction.
After a 4-day trial, the Court evaluated the natural and ordinary meaning of the words and determined that they were defamatory in nature. While the Court rejected the defence of justification—finding the statements to be factually incorrect based on the evidence presented by the Plaintiff’s witness—our client successfully established the defence of qualified privilege so the Plaintiff’s defamation claim was dismissed. The Court agreed that the communication occurred on a privileged occasion, ruling that our client, as a descendant and member of the Tso, possessed a legitimate social and moral interest to convey his management concerns to fellow clansmen, who had a corresponding interest to receive them.
Crucially, the Court rejected the Plaintiff's contention that the qualified privilege was defeated by express malice on our client’s part. Applying the established appellate principles, the Court emphasized that a defendant’s carelessness, irrationality, or tendency to leap to conclusions does not equate to malice. The Judge accepted that our client maintained an honest, genuine belief in the truth of his statements due to a breakdown in communication and a poor relationship with the Plaintiff, rather than an improper dominant motive or a reckless indifference to the truth. As a result, the Plaintiff’s claims were entirely dismissed, and he was ordered to pay a portion of our client’s legal costs.
This outcome represents a complete vindication for our client following a deeply personal family and customary land dispute. It also reinforces SFKS’s established expertise in handling highly contentious defamation, customary law matters, and complex disputes involving qualified privilege and factual challenges.
This case serves as a vital reminder of the robust protective boundaries afforded by the defence of qualified privilege in Hong Kong defamation law. It underscores that the law actively safeguards the freedom of honest communication where a shared moral, social, or legal duty exists—such as within family, community, or customary organizations. So long as a speaker acts in good faith to protect a legitimate interest that is shared by the audience and harbors an honest belief in what he says, the protection of privilege remains intact, even if the underlying conclusions are ultimately shown to be mistaken.
This case was led by our Consultant Mr. Tommy Tam and assisted by our Senior Associate Ms. Koey Wong and Trainee Solicitor Ms. Janice Leung. SFKS takes this opportunity to thank Counsel Mr. Stony Chan for his thorough and able assistance throughout these proceedings.
The full judgment can be found at:
Hostile behaviour is unfortunately increasingly common in Hong Kong and elsewhere, especially in view of the advance of the technology and the social media. Unwelcome conduct is performed as a tactic to achieve various objectives, such as ex-spouses attempting to save relationships, creditors trying to collect debts and competitors trying to drive each other out of business. Such hostile behaviour also takes various forms, such as spam calling the victims, spreading untrue statements about the victim and making unwelcome visits to the victims’ homes.
When such hostile behaviour crosses the line from being merely annoying to being actionable in law, victims may seek redress from the court. The current legal framework in Hong Kong addressing hostile behaviour is a patchwork of multiple causes of action stemming from common law and statutes.
This article aims at providing a brief introduction to some of the common causes of action related to hostile behaviour. Some of the causes of action closely relate to criminal offences. Criminal offences are virtually exclusively prosecuted by the Government and are hence out of the scope of this article.
1. The Tort of Harassment: Repeated unreasonable oppressive conduct
The tort of harassment has recently been recognized by the Court of Final Appeal in Sir Elly Kadoorie & Sons Limited v Samantha Jane Bradley [2026] HKCFA 2.
If someone is relentlessly targeting you with unwanted behavior, calls, or messages, they may be committing the civil tort of harassment. You must establish the following elements before you can succeed in a claim for the tort of harassment:
If the tort of harassment is established, the remedies can include:
A claim in the tort of harassment is not available to companies as mental distress to the claimant must be shown. However, harassment targeted at a company is often conducted through imposing unpleasant conduct on its employees, such as spam emailing its employees. In such a case, a company may nevertheless apply for an injunction to restrain harassment directed at its current employees. The rationale behind this power is that employers owe a duty to employees to provide a safe working environment.
2. Causing loss by unlawful means: Harming one’s economic interests by interfering with the actions of a third party by unlawful means
While it was ruled in Sir Elly Kadoorie & Sons Limited that claims in the tort of harassment are not available to companies, the Court of Final Appeal opined that the company in that case may potentially make a claim in the tort of causing loss by unlawful means.
The tort of causing loss by unlawful means covers situations where instead of taking actions against you directly, the defendant uses unlawful means to interfere with the actions of a third party which causes you economic loss.
The essential elements are:
The meaning of “unlawful means” in the second element has been considered in the landmark case of OBG Ltd and Another v Allan and Others [2008] 1 AC 1. The majority held that the unlawful means used must be an action (such as fraud or a threat) which would be independently actionable by that third party if he had suffered any loss because of it. This interpretation is consistently adopted in Hong Kong courts. In Sir Elly Kadoorie & Sons Limited, for example, the defendant harassed the claimant’s employees by sending an excessive number of emails to them making false allegations against the claimant. The acts of harassment against the claimant’s employees gives rise to an independent right for the employees to claim against the defendant any loss suffered as a result.
The primary relief upon a successful claim in causing loss by unlawful means is the compensation for loss or damage suffered as a result of the defendant's unlawful interference. In suitable cases, the court may grant an injunction restraining the defendant from interfering with the third party in the future.
3. Private nuisance: Hostile behaviour targeted at homes
Sometimes, hostile behaviour is directed at the homes of victims. The most well-known example is perhaps splashing red paint at the door of the debtor’s home as a tactic for debt collection.
A claim in private nuisance is a cause of action based on your right to enjoy your property. To sue on this claim, you must have a legal interest in the land, such as being the owner or the tenant named on the lease. In the vast majority of cases, it involves unwelcome conduct targeted at victims’ homes.
In the context of hostile behaviour, you will have a claim in private nuisance when the defendant commits an act which interferes with or disturbs your exercise or enjoyment of your ownership or occupation of land. The interference must not be trivial – it must be a substantial interference with comfort or convenience, judged according to the standard of a reasonable person. While this will essentially be a fact-sensitive question, it is at least arguable that conducts such as persistent splashing of paint at your home, aggressive visits and banging on the door of your home may fall within actionable examples.
Traditionally for a claim in private nuisance to be established, the defendant must be a neighbour of the plaintiff in the sense that the defendant should be an owner/occupier of neighbouring land. The landmark case of Hunter & ors v Canary Wharf Ltd [1997] AC 655 stated that “[private] nuisance is a tort protecting property rights. It is concerned with the activities of the owner or occupier of property within the boundaries of his own land which may harm the interests of the owner or occupier of other land.” There are cases in Hong Kong following this approach. For example, in MA (HK) Ltd & Anor v Yeung Yuk Sing (楊育城) & Ors [2017] HKCU 2762, a claim in private nuisance was rejected as the defendant was not owners/occupiers of neighbouring land. However, there is also case example such as Shen Xing (沈星) v Li Jun (李軍) [2014] HKCU 930 where a claim in private nuisance succeeded without such a neighbour relationship. It would appear that different outcome may partly due to the different degree, extent, and reasonableness of the interference in different cases but it highlights the potential limited application of this cause of action for interference made by strangers, thereby other causes of action (such as tort of harassment) may also need to be relied on.
The usual remedy for private nuisance is compensation for losses resulting from the nuisance (such as the reduction in the value of the property). In suitable cases, the court will also grant an injunction restraining the behaviour in question.
4. The Tort of Intimidation: Coercion Through Threats
Hostile behaviour can take the form of forcing victims into doing something they would not have done by unlawful threats. The core issue of the tort of intimidation is to coerce you into doing something against your will, causing you mental damage or financial loss.
If you intend to rely on the tort of intimidation, you must establish the following:-
As recognized by the House of Lords in the landmark case of Rookes v Barnard [1964] AC 1129, a threat to breach a contract is recognized as an “unlawful means” for the purpose of the first element. Other examples of threats to use “unlawful means” include threats to commit a tort, a crime or a breach of trust.
Upon a successful claim of the tort of intimidation, compensation for mental distress and financial loss will typically be awarded. An injunction restraining the defendant from continuing with the complained threatening acts may also be granted. If you have been coerced into entering into a contract, you will have the option to set aside the contract and be returned to the financial position before the contract was made.
5. Relief against hostile behaviour under specific statutory provisions
Other than torts, statutes may also provide causes of action to victims of hostile behaviour in specific cases.
The Personal Data (Privacy) Ordinance (“PDPO”) (Cap.486) may be helpful in certain cases where misuse of personal data is involved. Under section 66 of the PDPO, an individual who suffers an injury to feelings or financial loss by reason of a contravention of a requirement under the PDPO by a “data user” which relates, at least partly, to his/her personal data may seek compensation from the “data user” in respect of the financial or psychological damage. The term “data user” is defined as “a person who, either alone or jointly or in common with other persons, controls the collection, holding, processing or use of the data” in section 2 of the PDPO. With the requirement that compensation can only be sought from a “data user” in respect of the wrongdoings of that “data user”, its applicability to harassment cases is limited.
In addition, sections 3, 3A and 3B of the Domestic and Cohabitation Relationships Violence Ordinance (Cap.189) provides for the grant of an injunction in favour of victims of molestation in specific familial or cohabitation relationships.
6. Concluding remarks
If you are unfortunate enough to fall victim to hostile behaviour, documentation is your most important weapon. Whatever cause of action you rely on, and regardless of whether you are seeking compensation, injunctive relief or both, you must show that the unwelcome conduct you complain of did occur. It is advisable to keep a written record of the unwelcome conduct. If spam calling is involved, obtain the relevant phone call records from your telecom service provider. If physical disturbance with your home is involved, consider installing a CCTV at your door and making a report to the management office for them to log the incidents.
The above causes of action are not exhaustive. In appropriate cases of hostile behaviour, other causes of action can be relied on. Nevertheless, the causes of action often overlap with each other and it is common to make claims based on multiple causes of action. When making a claim in respect of hostile behaviour, given the wide range of causes of action that may be available, it may be advisable to seek legal advice.
This article is co-authored by our Partner Sidney Ho and our Trainee Solicitor Samuel Chow.
Disclaimer : This material is provided for general information only. It does not constitute legal or other professional advice nor constitute any lawyer-client relationship between Sit, Fung, Kwong & Shum and any user or browser. No liabilities are assumed arising from any reliance of information in this material.
New Individual Income Tax Regulations Regarding Offshore Trust Assets
In recent years, establishing offshore trusts has gradually become a new trend among Chinese Mainland residents for wealth management and asset allocation. Through this approach, high-net-worth individuals can not only effectively achieve risk isolation, asset protection, and tax planning, but also provide more flexible, private, and professional arrangements for the long-term security and succession of family members. However, in light of the Announcement on Matters Concerning Individual Income Tax on Offshore Trusts (Announcement No. 21 of 2026) (the “Announcement”) issued by the Ministry of Finance and the State Taxation Administration on July 24, 2026, individuals who transfer property into offshore trusts or receive income through offshore trusts are deemed to have obtained income prescribed under the Individual Income Tax Law of the People’s Republic of China, and are therefore required to declare and pay individual income tax in accordance with the provisions of the Announcement.
(1) Scope of the Announcement
Offshore Trusts
Offshore trusts refer to trusts established under foreign laws or other legal arrangements with trust-like functions, including foreign legal arrangements that are not established in the name of a trust but substantially perform functions similar to those of a trust. However, financial products issued by certain banks, insurance companies, securities firms, fund companies, etc., are excluded.
Resident Individuals
Individuals who have acquired foreign nationality or long-term or permanent residency abroad, but whose primary economic interests originate from within China, may also be determined to be resident individuals with domicile. The following rules apply to resident individuals:
(a) Where a resident individual transfers property into an offshore trust, the individual shall take the balance after deducting the original cost of the property and reasonable expenses from the market value at the time of transfer as the taxable income, and declare and pay individual income tax under the category of “income from transfer of property”;
(b) Income generated during the existence of an offshore trust into which a resident individual has transferred property, regardless of whether it is actually distributed, shall be subject to annual individual income tax declaration and payment by the resident individual as the taxpayer under the category of “income from transfer of property” or “interest, dividends, and bonuses”; and
(c) A resident individual shall also declare and pay individual income tax on distributed income received from an offshore trust into which property has been transferred by a non-resident individual.
Non-Resident Individuals
Where a non-resident individual transfers property into an offshore trust, it shall be deemed as a transfer of property by an individual. The individual shall take the balance after deducting the original cost of the property and reasonable expenses from the market value of the property as the taxable income in respect of income from transfer of property derived from within China, and declare and pay individual income tax under the category of income from transfer of property.
However, if a resident individual and a non-resident individual transfer property into the same offshore trust, it shall be treated as if the entire transfer was made by the resident individual, regardless of whether the property is sourced from within China.
(2) Statute of Limitations for Tax Recovery
The Announcement takes effect from the date of issuance (i.e., July 24, 2026). Nevertheless, the Announcement also explicitly states that there are recovery periods for taxes arising from the transfer of property into offshore trusts and from income generated during the existence of offshore trusts.
With respect to the transfer of property into offshore trusts, effective from January 1, 2026, resident individuals are required to declare and pay individual income tax. Moreover, for the period from January 1, 2023, to December 31, 2025, any individual income tax payable but unpaid by resident individuals arising from the transfer of property into offshore trusts, as well as any individual income tax payable but unpaid by non-resident individuals arising from the transfer of property into offshore trusts during the period from January 1, 2023, to July 24, 2026, shall also be declared and paid within 90 days from July 24, 2026. However, it should be noted that the Announcement explicitly states that if the amount of unpaid individual income tax is relatively large, the tax authorities may extend the statute of limitations for recovery in accordance with the provisions of the Law of the People’s Republic of China on the Administration of Tax Collection.
With respect to income generated during the existence of offshore trusts, effective from January 1, 2026, resident individuals are required to declare and pay individual income tax. For income derived from offshore trusts of resident individuals prior to January 1, 2026, regardless of the income category, resident individuals are also required to declare and pay individual income tax within 90 days from July 24, 2026, under the category of “interest, dividends, and bonuses”. In addition, resident individuals are required to declare and pay individual income tax within 90 days from July 24, 2026, on income distributed to resident individuals during the existence of an offshore trust into which property has been transferred by non-resident individuals.
Late payment surcharges could be avoided if the declaration and payment are completed within the above 90-day window. If any person fails to pay individual income tax within the prescribed time limit, the tax authorities will impose a late payment surcharge, which is at a high annual rate of approximately 18.25%.
(3) Impact of the Announcement
Immediate Declaration and Payment, and Recovery Periods
As the Announcement takes effect immediately from the date of issuance, it requires that any individual income tax payable but unpaid within the recovery periods be declared and paid within the 90-day window. For offshore trusts into which property was transferred on or after January 1, 2023, and for offshore trusts that generated income prior to January 1, 2026, the relevant individuals and management teams need to promptly sort through and clarify the trust assets and income, so as to declare and pay individual income tax in a timely manner and avoid tax recovery, late-payment surcharges, or the imposition of penalties by the tax authorities. If the amount of unpaid individual income tax is substantial, the tax authorities may also extend the period for tax recovery.
Installment Payment of Tax
The tax authorities may allow applications for installment payment of tax. Given that the new rules carry retroactive recovery periods, the amount of unpaid individual income tax may be substantial. Where taxpayers face difficulties in paying the tax after making a declaration in accordance with tax laws, they may, upon filing a record with the competent tax authority, pay the tax in equal installments over a period of five years.
New Offshore Trusts to Be Established
In summary, with the formal implementation of the Chinese Mainland’s new individual income tax rules on offshore trusts, any newly established offshore trust structure must take individual income tax into core consideration. Whether it is the income from transfer of property arising from the transfer of assets into the trust or the various types of income generated during the existence of the trust, tax compliance and the corresponding tax cost have become key factors in determining the feasibility of cross-border wealth management structures.
Reported New Levy of Tax on Gains from Offshore Insurance Policies
Hong Kong has been a primary offshore wealth management gateway for Chinese Mainland residents seeking global asset diversification and financial protection, providing a wide range of wealth management products such as insurance. However, according to a report from Caixin and other news sources, Chinese Mainland tax authorities have also begun levying individual income taxes on gains from offshore insurance policies, including those in Hong Kong.
It is reported that Beijing and Hangzhou authorities have started to apply personal income tax rates of 20% on returns from Hong Kong insurance policies, including dividend and interest earned on prepaid premiums. The tax collection is feasible due to the implementation of Common Reporting Standard and the sharing of ownership details. Such tax measures may adversely affect both Mainland residents who have placed offshore insurance policies and insurers who have heavy on these residents purchasing policies, since the relevant income will clearly be subject to 20% tax and yield advantage of such offshore policies will be diminished.
Although the new levy is less of a threat than a total ban on buying offshore insurance which is also a concern, together with the recent tax regulations regarding offshore trust assets, the reported new levy of tax on gains from offshore insurance policies shows the tightening scrutiny of offshore capital and investments by the Chinese Mainland government and the increasing effect of tax on their gains. As such, all parties involved in wealth management exercise need to closely monitor other actions which may be taken by the government in the future and consider the impacts of such measures before conducting any wealth management or investment activities.
Disclaimer :
This material is provided for general information only. It does not constitute legal or other professional advice nor constitute any lawyer-client relationship between Sit, Fung, Kwong & Shum and any user or browser. No liabilities are assumed arising from any reliance on the information in this material. Please consult your cross-border tax advisor regarding any Chinese Mainland tax matter.
Sit, Fung, Kwong & Shum is a Hong Kong law firm and does not practice or provide legal or other advice on the laws or tax matters of other jurisdictions. References to the laws and practice of any other jurisdictions in this material are provided for general reference and comparative purposes only, and do not constitute any advice, opinion or representation on the law or practice in those jurisdictions.
For organisations operating in Hong Kong, achieving recognition as a tax-exempt charity under Section 88 of the Inland Revenue Ordinance (Cap. 112) (“S.88 of the IRO”) is often a defining milestone. Beyond the immediate fiscal advantages, this status serves as a powerful signal of credibility, strengthening donor confidence and providing a robust foundation for long-term fundraising and market presence. However, obtaining this status is far from an automatic administrative process; it requires a meticulous approach to the organization’s constitutional structure, its governance framework, and the practical reality of its daily operations.
A. The Gatekeeper’s Role: The Inland Revenue Department
Under Section 88 of the IRO, the Inland Revenue Department (“IRD”) acts as the primary gatekeeper for tax exemptions. The statute provides tax relief for charitable institutions and trusts of a public character, but the IRD’s review is substantive. An organization must first qualify as a charity at law before it can be accorded tax-exempt status. In practice, this means the IRD will look past broad aspirations to determine whether the entity is genuinely established and maintained for exclusively charitable purposes, ensuring its operations remain strictly aligned with its stated mission.
B. Defining “Charity” at Law The Public Benefit Test
In Hong Kong, being "non-profit-making" is not synonymous with being a "charity". To meet the legal criteria, an organization must be established exclusively for charitable purposes, which are traditionally recognised under the four heads of charity:
a. the relief of poverty;
b. the advancement of education;
c. the advancement of religion; and
d. other purposes of a charitable nature beneficial to the community not falling under any of the preceding heads.
Where an organisation relies on the fourth head, the public benefit must extend to the Hong Kong community.
The core test is whether the organisation is exclusively charitable in both purpose and operation. This means its objects must be limited to charitable purposes, and its actual activities must remain aligned with those purposes. Worthy social objectives are insufficient if the legal criteria of exclusivity and purpose are not strictly satisfied in both the organization's objects and its operations. If the organisation’s objects are mixed, private, political, or otherwise non-charitable, it will not satisfy the statutory and common law requirements for recognition.
C. The Public Benefit Test
Equally fundamental to charitable status is the requirement of "public benefit," which is analyzed through two distinct lenses: the public aspect and the benefit aspect.
On the public side, the benefit must be available to the general public or a sufficiently large section of it, with beneficiaries appropriate to the organization's purpose. Where the benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted by geographical or other restrictions. Crucially, any personal benefit—such as those received by founders or members—must be purely incidental, and any restrictions based on family ties or employment are generally viewed as inconsistent with charitable status.
On the benefit side, the organization must provide clear and identifiable advantages related to its purposes, balanced against any potential detriment or harm.
In addition, the organisation must act lawfully and must not engage in, or support, conduct that is contrary to national security or otherwise inconsistent with charitable purposes.
D. Building a Robust Governing Document
A properly drafted governing instrument—be it a trust deed, articles of association, or a constitution—is the indispensable blueprint of a charity. The document should not merely state broad aspirations; it should set out the charitable objects with precision and provide a clear legal framework for administration, accountability, and dissolution.
In practice, the IRD expects the governing document to contain several key features. First, it should limit the application of the organisation’s funds strictly to its stated charitable objects. Second, it should prohibit the distribution of income or property to members, founders, or directors, except where limited remuneration is properly justified and expressly permitted. Third, it should require disclosure and management of conflicts of interest. Fourth, it should provide for the keeping of proper accounting records and the preparation of annual financial statements. Finally, it should ensure that any surplus assets on winding up are transferred to another charitable institution or trust of a public character.
From a commercial and governance perspective, these provisions are not merely formalities. They are often decisive in establishing that the organisation is sufficiently independent, accountable, and properly constituted to qualify for recognition. Where remuneration of governing body members is contemplated, the governing instrument should address the issue carefully and with appropriate safeguards. Any such remuneration must be necessary, reasonable, and consistent with the organisation’s charitable purposes.
E. The Application Process: A Substantive Review
The application under Section 88 of the IRO recognition should be approached as a substantive legal review rather than a routine filing exercise. It involves submitting a prescribed form along with intensive supporting documentation, including the organization's constitution and detailed records of its activities and funding.
The supporting documents will typically include the organisation’s constitutional documents, details of its activities, and information showing how its funds are applied and governed. In reviewing the application, the IRD will consider not only the wording of the constitution but also the organisation’s historical, current, and intended operations. This means that the applicant must ensure consistency between the legal documents and the practical reality of the organisation’s work.
Where the application is complete and no further clarification is required, the IRD’s guidance indicates that it generally aims to respond within four months. In more complex cases, particularly where the organisation has trading activities, investment structures, or unusual governance arrangements, a longer review period should be expected.
F. Trading Activities and Tax Exposure
It is a common misconception that the status under Section 88 of the IRO provides an absolute shield against all taxes. Charities may still be liable for profits tax on certain trading or business activities unless specific statutory conditions are met. Specifically, the profits must be applied solely for charitable purposes, must not be expended substantially outside Hong Kong, and the trade or business must either be carried on in the actual carrying out of the charity’s expressed objects or mainly by the charity’s beneficiaries.
This distinction is particularly relevant for organisations that generate income through retail sales, property letting, commercial services, fundraising events, or other revenue-producing activities. The mere fact that profits are later used for charitable purposes does not, by itself, make the activity tax exempt. The commercial character of the activity, the way it is structured, and its connection to the charity’s objects are all relevant. For charities with significant revenue-generating operations, it is essential to assess the tax consequences before the activity begins, rather than after profits have been generated.
G. Ongoing Compliance and Review
Securing recognition under Section 88 of the IRO is not a "once-and-for-all" approval. The IRD retains the authority to review a charity’s status if circumstances change, and the organization remains under a continuing obligation to maintain transparent records. This includes notifying the Department of changes to its governing instrument, address, activities, or name. Internal governance must remain robust, with clear board oversight and financial discipline to ensure that funds are consistently deployed in furtherance of charitable objects. Any material straying from the constitution or engagement in inconsistent activities could jeopardize the organization's tax-exempt standing.
H. Practical Takeaways
For organisations seeking recognition under S.88 of the IRO, the most effective approach is to treat the process as both a legal structuring exercise and a compliance exercise. The constitutional documents should be drafted with precision, the charitable purpose should be clear and exclusive, and the operating model should be aligned with the claimed status from the outset. Where there are commercial activities, cross-border elements, or non-standard governance arrangements, specialist advice should be obtained early.
This article is co-authored by our Partner Simon Siu and our Trainee Solicitor Janice Leung.
Disclaimer :
This material is provided for general information only. It does not constitute legal or other professional advice nor constitute any lawyer-client relationship between Sit, Fung, Kwong & Shum and any user or browser. No liabilities are assumed arising from any reliance on the information in this material.
Sit, Fung, Kwong & Shum is a Hong Kong law firm and does not practice or provide legal advice on the laws of other jurisdictions. References to the laws and practice of any other jurisdictions in this material are provided for general reference and comparative purposes only, and do not constitute any advice, opinion or representation on the law or practice in those jurisdictions.
