How To File Hong Kong Donation Tax Deduction For Companies?

3 Reasons to Give to Charity for Hong Kong Tax Deduction

Maximize Tax Benefits

Hong Kong’s tax laws incentivize charitable giving by offering Hong Kong a donation tax deduction. When you donate to registered charitable organizations in Hong Kong, you can claim your company’s Hong Kong donation tax deduction that reduce your overall tax liability. 

Enhance Corporate Reputation

In today’s socially conscious world, consumers and stakeholders appreciate and support businesses that actively contribute to the betterment of society. Committing to charitable giving can differentiate your company and build trust among your customers and partners. 

Align with CSR Values

Giving to charity aligns with Corporate Social Responsibility (CSR) principles. Businesses can showcase their commitment to ethical business practices and sustainability by supporting charitable causes. This alignment resonates with stakeholders and can increase employee morale and engagement. 

What Qualifies as a Donation in Hong Kong?

The donation must be in the form of money to be eligible for a Hong Kong donation tax deduction. Payments for activities like purchasing raffle tickets, lottery tickets, admission tickets for charity shows, buying goods at a bazaar, and services such as saying prayers do not qualify for a Hong Kong donation tax deduction.

In addition, the donation must be made to a charitable institution or a trust exempted from tax under the Inland Revenue Ordinance. Alternatively, you can donate to the Government for philanthropic purposes. 

The total Hong Kong donation tax deduction for approved charitable donations must be at least $100. This deduction cannot exceed 35% of your income after depreciation allowances, assessable profits, or allowable expenses.

How to Record Approved Charitable Donations in Bookkeeping?

To record approved charitable donations for Hong Kong donation tax deduction in your bookkeeping, follow these steps:

1. Create a Dedicated Donation Account

Start by setting up a separate account specifically for donations. Add the charitable organization as a supplier. When you donate, record it as you would any other payment to a supplier, whether a check, payment, or bill. This helps in systematically tracking your donations.

2. Expense Account for Donations

Establish an expense account exclusively for tax-deductible contributions. This account will appear on your income statement, providing a clear overview of your charitable contributions for reporting purposes.

3. Request an Acknowledgment

After donating, ask the charity for an acknowledgment. Keep detailed records, which can be in the form of a written communication (like an email or receipt) from the organization. This should include the organization’s name, the donation date, and the total amount donated.

4. Bank Records

Bank records are essential for proper recordkeeping. These records should show the charity’s name, the exact donation amount, and the date of the donation. Bank records can include bank statements, electronic funds transfer receipts, canceled checks, and credit card statements. 

Which Approved Charity Organizations Can I Donate To in Hong Kong?

Donors can verify whether a charity organization is tax-exempt by using these resources:

• Online Search for Tax-Exempt Charities – You can perform an online search to check the tax-exempt status of a charity. Simply input the full name of the organization you are interested in.
• List of Tax-Exempt Charities – The Inland Revenue Department conducts periodic reviews of charitable institutions and trusts under the Inland Revenue Ordinance. They maintain and publish a list of recognized tax-exempt charities. 

How Can We Help – Our Taxation Services