Charitable Trusts and Family Offices: paving the way for a sustainable charitable future in Hong Kong

The Hong Kong government is committed to developing the Special Administrative Region into a global centre for philanthropy in which family offices can integrate philanthropy into their wealth management strategies to drive social change.

A study commissioned by InvestHK in March estimated that Hong Kong has more than 2,700 single-family offices. Although family offices are privately held companies whose central function is to maximise the wealth families pass on to subsequent generations, selective philanthropy can be a powerful tool for integrating family values into impact investments and wider legacy building.

And the number of family offices is expected to grow, attracting even more philanthropic investment and capital to Hong Kong. The government has introduced a series of initiatives in recent years to attract family offices, including offering tax relief. This year it launched a revised version of its Capital Investment Entrant Scheme, enabling high-net-worth investors to claim permanent residency status if they invest HKD30 million (USD3.8 million) in qualifying assets.

Speaking at the Hong Kong Jockey Club’s recent ‘Philanthropy for Better Cities Forum’, Hong Kong Chief Executive John Lee Ka-chiu said the city had a “rich tradition of giving”. It boasted more than 10,000 tax-exempt charities, while approved charitable donations under the city’s profits and salaries tax totalled around HK$7 billion (US$898 million) a year.

This reflected the city’s commitment of private donors to different social causes, as well as the government’s efforts to attract global family offices and asset owners. “We are determined to realise Hong Kong as a go-to destination for global family offices passionate about making a difference,” Lee said.

He added that the city could provide philanthropists with wealth management tools and channel their resources into initiatives. One such tool is the charitable trust, which not only provides stable funding sources for charitable organisations, but also effectively promotes the sustainable transmission of wealth.

Many businesses and family offices in Hong Kong have started to utilise charitable trusts to fulfill their social responsibilities. For instance, some family offices have established dedicated trust funds to support charitable projects in areas such as education, environmental protection or community development. This not only benefits society but also enhances the family’s sense of social responsibility and provides a long-term, sustainable legacy.

What is a Charitable Trust?

A charitable trust is a legal structure that allows donors to transfer property or funds into a trust specifically for charitable purposes. This structure ensures that the use of funds aligns with the donor’s intentions and can support specific charitable projects or organisations over the long term.

Hong Kong’s trust regime is governed by the Trusts Ordinance and related laws. A charitable trust must be set up for identifiable public benefit, and the beneficiary must be the general public. Charitable purposes are defined as relief of poverty, advancement of education, advancement of religion, or other charitable purposes that benefit society but do not fall into any of the preceding categories.

Importantly, Section 88 of the Inland Revenue Ordinance (Cap 112) provides that “any charitable institution or trust of a public character” is exempt from tax and shall be deemed always to have been exempt.

The trust deed should state precisely and clearly the charitable purposes for which the charity is established and, where a charity carries on a trade or business, the profits should be applied solely for charitable purposes, should not be expended substantially outside Hong Kong, and the trade or business must either be exercised in the course of carrying out the expressed objects of the charity or the work in connection with the trade or business must be mainly carried on by persons for whose benefit the charity is established.

Synergies between Family Offices and Charitable Trusts

• Effective fund allocation – Family offices often have professional financial management capabilities, which can more effectively allocate funds within charitable trusts to ensure they are directed to the most needed projects.
• Sustained social impact – Through charitable trusts, family offices can not only achieve short-term charitable goals but can also support social development in the long term, enhancing the family’s legacy.
• Cultivating responsibility – Family offices can provide a platform to involve younger generations in the management of charitable trusts, enhancing their understanding of social issues and sense of responsibility, which is crucial for the intergenerational transmission of family wealth.

Hong Kong’s ‘Impact Link’ philanthropy initiative

In March this year, the Hong Kong government launched a new initiative, which aims to bring charitable causes requiring funding together with family offices and philanthropists, as it looks to build the city into a global family office hub.

Impact Link (or iLink) is run by the Hong Kong Academy for Wealth Legacy (HKAWL) to showcase charitable projects requiring funding. The iLink database will provide information on vetted charitable causes, with an initial focus on areas including public health, life sciences, poverty alleviation, education and community.

This will allow family offices and asset owners to make more informed decisions on charity projects so that their contributions can create maximum impact. It will also include projects using new technologies, such as AI, to try to tackle these issues in Hong Kong, mainland China and internationally.

The initiative is supported by the Bill & Melinda Gates Foundation, Fondation de France Asia and the Jockey Club-backed Institute of Philanthropy.

Secretary for Financial Services and the Treasury Christopher Hui said: ‘Through key initiatives such as the new Capital Investment Entrant Scheme, tax concessions, and the establishment of the Hong Kong Academy of Wealth Legacy and many more, we have rolled out the red carpet, inviting family offices to make Hong Kong home.”

“Charitable trusts provide individuals and businesses in Hong Kong with an effective means to fulfill their social responsibilities while supporting meaningful charitable projects in the long term,” said Vivian Leung, Associate Director at Sovereign Trust (Hong Kong).

“The rise of family offices, together with increased government support for charitable endeavours, means that charitable trusts are set to play an increasingly important role in Hong Kong’s charitable ecosystem. This will not only assist in advancing social progress, it opens up more possibilities for future charitable initiatives.”