HONG KONG: Court rules Anglicans must fork out millions in taxes

February 4, 2010

The Hong Kong Sheng Kung Hui (Anglican Church in Hong Kong) will have to pay 180 million Hong Kong dollars (US$23 million) in taxes following a court ruling.

The Anglican church had appealed to overturn a tax bill on profits made from the redevelopment of an orphanage into a luxury housing project.

The court on Jan. 27 upheld the decision of the government in Hong Kong that the Anglican church had not proved that profits it made from the redevelopment project had been spent on charitable activities.

The Anglican church had argued that as a charitable body taxes on the project should be waived.

The court said that the constitution of Hong Kong, which is a Special Administrative Region of China, is "too vague" to limit the church to exercising its powers only within the realm of charity.

The Anglican church had engaged in a joint venture with a local developer in the 1990s to redevelop into a luxury housing project the former orphanage, St. Christopher's Home, which the church had run since the 1930s.

The church derived a profit of 1.119 billion Hong Kong dollars ($US0.143 billion) between 1998 and 2006. The government insisted that the church should pay taxes of 180 million Hong Kong dollars on the 1.119 billion Hong Kong dollars profit it made.

The court upheld the decision of the independent statutory body, the Inland Revenue Review Board.

The board stated that the church approached the redevelopment project "on commercial principles, with the laudable object of raising as much income as possible for [the church] and its charitable activities ... (The church has) chosen to carry on a separate venture or enterprise of a lucrative commercial and trade character, different and distinct from its charitable work."

The review board also said the Anglican church had presented "no evidence on the profits not being expended substantially outside Hong Kong," which was one of the requirements for tax exemption on profits.

Christian management professionals said that the court's judgment would have far-reaching outcomes for church bodies, some of whom had developed, or were applying to develop properties into housing projects for welfare.

The church said it needs to study the judgment before it decides if it will appeal the court ruling.

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