Charitable Trust Deed (Hong Kong) (Trusts)

A Charitable Trust Deed (Trusts) in Hong Kong sets out how the trustee is to hold and apply the trust property for the named beneficiaries.

Charitable trusts in Hong Kong must fall within one of four recognised heads of charity: relief of poverty, advancement of education, advancement of religion, or other purposes beneficial to the community. The fourth head is interpreted broadly by the Court of First Instance and includes promotion of the arts, protection of the environment, relief of disaster, and advancement of health. Hong Kong courts apply the traditional English classification, as the jurisdiction has not enacted equivalent legislation to the UK Charities Act 2006 or 2011.

A charitable trust has perpetual succession and is not subject to the rule against perpetuities — unlike private trusts, which must comply with the Perpetuities and Accumulations Ordinance (Cap. 257). The absence of a perpetuity period means a charitable trust can hold and apply property in perpetuity, making it ideal for endowment structures and long-term philanthropic programmes.

The trust deed sets out the charitable objects with precision, identifies the settlor and the initial trustees, specifies the trustee powers and obligations under the Trustee Ordinance (Cap. 29), and contains provisions for trust administration, investment, accumulation, and eventual dissolution. Section 7 of the Trustee Ordinance confers a general power of investment on trustees, which the deed may expand or restrict. The deed also addresses the cy-près doctrine: if the charitable objects become impossible or impractical, the Court of First Instance may order that trust assets be applied to purposes as close as possible to the original objects.

Tax-exempt status under Section 88 of the Inland Revenue Ordinance (Cap. 112) is one of the most significant advantages of a charitable trust. A charitable institution or trust of a public character that qualifies under Section 88 is exempt from profits tax on charitable activities and investment income. Qualifying donors benefit from tax deductibility under Section 16D of the Inland Revenue Ordinance, subject to statutory limits. Tax-exempt status is applied for separately from the Inland Revenue Department (IRD) by submitting the trust deed, a description of charitable activities, and supporting evidence.

The Charitable Trust Deed is distinct from other charitable structures available in Hong Kong. A company limited by guarantee under the Companies Ordinance (Cap. 622) is the alternative vehicle for charities that prefer a corporate structure with its associated governance requirements, directors' duties under Cap. 622, and annual reporting obligations to the Companies Registry. The charitable trust structure avoids these corporate compliance obligations, at the cost of less clearly defined governance rules. For larger philanthropic programmes where donor confidence and institutional credibility matter, some organisations choose to operate through a company limited by guarantee that has also obtained Section 88 status. Forms Legal provides a professionally structured Charitable Trust Deed template for Hong Kong, covering all essential elements required to establish a valid charitable trust and support a Section 88 application to the IRD. Available as a free PDF and Word download.

A Charitable Trust Deed is needed when establishing a new charitable organisation in Hong Kong in trust form — as opposed to a company limited by guarantee, which is the other common vehicle for charitable activities. The trust structure is chosen for its flexibility, lower ongoing administrative costs compared to a company, absence of directors' duties legislation, and its long-established standing under Hong Kong common law and with the Inland Revenue Department.

Family philanthropic foundations frequently use charitable trust structures. High-net-worth individuals and families who wish to formalise their philanthropy, pool assets for charitable giving, and achieve Section 88 tax-exempt status for donations will establish a charitable trust with family members or professional trustees as trustees and a clearly defined mission (for example, advancement of education in underprivileged communities, or relief of poverty in Hong Kong and the Greater Bay Area).

Scholarship endowments are a common application. An individual, company, or alumni association that wishes to fund scholarships at Hong Kong universities, secondary schools, or vocational training institutes will establish a charitable trust for the advancement of education. The endowment fund is held in trust and income is applied annually to scholarship payments, in perpetuity.

Community welfare and social service trusts use charitable trust structures to fund programmes that relieve poverty, provide medical care, support the elderly, or assist persons with disabilities. The trust structure allows assets to be ring-fenced from personal or corporate creditors of the settlor.

Individuals making testamentary charitable gifts may establish a charitable trust by will, directing executors to transfer part of the estate to a charitable trust for specified purposes. This allows the individual to leave a lasting charitable legacy and may reduce estate duty exposure in cross-border estates.

Hong Kong religious organisations, community associations, and arts bodies that wish to hold assets in perpetuity for charitable purposes will use the charitable trust structure where incorporation as a company is considered unnecessarily complex or expensive.

A Charitable Trust Deed is also needed when converting an informal charitable arrangement into a formal trust structure — for example, when a committee that has been managing a charitable fund wishes to formalise governance and apply for Section 88 status.

A Hong Kong Charitable Trust Deed requires careful drafting to satisfy the legal requirements for charitable status under common law and to support a successful application for Section 88 tax exemption from the Inland Revenue Department. Forms Legal's template covers all the following essential elements.

Settlor details and initial trust property: the full name and address of the settlor; a description of the initial property settled on the trust (which may be a nominal sum such as HK$100 for a trust established to receive donations, or a larger endowment); and the settlor's declaration of trust.

Charitable objects: a precise statement of the trust's charitable purposes, drafted to fall clearly within one of the four heads of charity. The objects clause must be exclusively charitable — mixed charitable and non-charitable purposes will invalidate the trust. Objects must also satisfy the public benefit requirement.

Public benefit statement: an express acknowledgment that the trust is established for the benefit of the public or a sufficiently large section of the public. For education trusts, this typically means that scholarships or programmes are available to a class of persons defined by academic merit rather than personal connection to the settlor.

Initial trustees and appointment mechanism: identification of the initial trustees (minimum two; a trust corporation counts as one); the mechanism for appointing successor trustees when a trustee retires, dies, or becomes incapacitated; and any requirements for trustee qualifications (for example, that the chairman must be a Hong Kong permanent resident).

Trustee powers: express powers going beyond the Trustee Ordinance (Cap. 29) statutory defaults, including power to invest in any assets as beneficial owners under Section 7; power to accumulate income; power to employ and remunerate agents, solicitors, accountants, and investment managers; power to make grants to individuals or organisations; power to collaborate with other charities; power to open and operate bank accounts; and power to acquire or lease property.

Amendment provisions: a power to amend the trust deed, limited to preserve the exclusively charitable nature of the trust and the public benefit requirement. Amendments that would destroy charitable status require court approval under the cy-près doctrine.

Dissolution clause: provisions for winding up the trust if the charitable objects become impossible, impractical, or unnecessary. On dissolution, trust assets must be transferred to one or more other Section 88 charitable institutions — they cannot revert to the settlor or trustees personally.

Section 88 IRD application reference: confirmation of the trustees' obligation to apply to the Inland Revenue Department for Section 88 profits tax exemption status; record-keeping obligations; and the obligation to maintain the exclusively charitable character of trust activities.

Donations and fundraising: express power to receive donations, legacies, testamentary gifts, and grants from individuals, corporations, foundations, and government bodies; provisions addressing the treatment of restricted donations (gifts for a specific charitable purpose); and compliance with Hong Kong's common law on charitable fundraising. Charitable trusts in Hong Kong are not subject to a dedicated charitable fundraising licensing regime equivalent to the UK Charities Act, but fundraising activities in public places may require permits from the Social Welfare Department.

Conflict of interest: provisions requiring trustees to declare and manage conflicts of interest, prohibiting trustees from benefiting personally from trust assets, and establishing a quorum for decisions where a trustee has a conflict.

Governing law: the laws of the Hong Kong Special Administrative Region, with disputes referred to the Court of First Instance of the High Court of Hong Kong. The forms-legal.com Charitable Trust Deed (Hong Kong) template covers the mandatory elements under Trustee Ordinance (Cap. 29).