A company limited by guarantee and charity tax exemption application

If there is no intention to distribute the company’s profits to its members and does not therefore need to have shares, customers may consider forming a company limited by guarantee. It is usually formed for non-profit making purposes and is more commonly used for trade associations, charitable bodies and schools.

A company limited by guarantee
Features:
  • The purpose of forming a company is not for profit making
  • There is no intention to distribute the company’s profits to its members and does not therefore need to have shares
  • The liability of its members is limited to the amount which they agree to contribute to its assets in the event of the company being wound up
  • At least one founder member, two directors and one secretary

Charitable institutions of a public character are exempt from tax under section 88 of the Inland Revenue Ordinance. Charities wishing to enjoy the tax exemption may apply to the Department.

Charity tax exemption application
Conditions (with charitable purposes)
  • (a) Relief of poverty
  • (b) Advancement of education
  • (c) Advancement of religion; and
  • (d) Other purposes of a charitable nature beneficial to the community not falling under any of the preceding heads.
Documents required
  • (a) An application letter
  • (b) A draft of the instrument and rules governing its activities
  • (c) A list of the activities planned for the next 12 months from the date of establishment or date of application
Time required
  • Approximately 9 – 12 months

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