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hong kong donation tax deduction

Many companies in Hong Kong actively engage in charitable activities and donations to give back to their community. However, what often needs to be clarified is how to leverage these acts of generosity to maximize tax benefits. 

This comprehensive guide will explore the intricacies of filing Hong Kong donation tax deductions for companies, allowing you to understand the tax implications of your charitable contributions, which can help you support noble causes and optimize your financial strategies.

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

At Premia TNC, we understand that navigating the complexities of taxation can be daunting for businesses and individuals. That’s where our taxation service comes into play, offering you comprehensive support and expertise to ensure your financial matters are handled precisely and efficiently.

Having a knowledgeable and experienced team on your side is essential regarding taxation. At Premia TNC, we boast a team of professionals well-versed in the intricacies of tax laws and regulations. They stay up-to-date with the latest changes in tax codes, ensuring that you receive accurate advice and optimal tax strategies.

Contact us today for a FREE consultation and discover how our taxation service can significantly impact your financial journey. 

Hong Kong Donation Tax Deduction – Frequently Asked Questions

1. Can I receive a Hong Kong donation tax deduction for donations made in my children's name?

Tax deductions are applicable when donations are made in your or your spouse’s name, provided you are not living apart.

2. Is it necessary to retain supporting documents as proof of donation deductions?

It’s advisable to secure receipts from recipients and keep them for six years after the assessment year in which the donations were made. While attaching supporting documents during tax return submission isn’t mandatory, you should have receipts available if your case undergoes review.

3. If I contribute cash to the donation bag during church masses, can I claim a deduction for this donation?

To ensure eligibility for Hong Kong donation tax deduction claims, you should maintain donation receipts as evidence of your contributions when dropping cash into the church’s donation bag or donating to an approved charity.

4. What are the consequences if I can't provide receipts to support my donation claims?

Failure to produce receipts may result in your Hong Kong donation tax deduction claim being rejected. In cases where deductions were previously granted in good faith, the Assessor may withdraw them and issue an additional assessment. Additionally, false claims could lead to penalties or legal actions.