"How long do I have to keep all this?" is the question I am asked most often after a year end, usually by someone standing next to a box of receipts. The answer in Hong Kong is short: at least seven years.
Where the rule comes from
Two laws say the same thing. The Inland Revenue Ordinance, in section 51C, requires anyone carrying on a business in Hong Kong to keep sufficient records of income and expenditure for at least seven years after the transactions they record. The Companies Ordinance requires a company to keep its accounting records for seven years as well. A company is bound by both, and the stricter reading of either is the safe one.
What counts as a record
- the books of account — ledgers, journals, the accounts themselves;
- bank statements, cheque stubs and paying-in slips;
- sales invoices and purchase invoices;
- receipts and vouchers for expenses;
- contracts, leases and loan agreements behind the figures;
- payroll records.
The test is whether someone could take the records and check how each figure in the accounts and the tax return was reached.
Paper or scans
Records may be kept electronically, provided they are complete, legible and can be produced readily when asked for. A clear scan, filed by year and kept backed up, is fine. A photograph of a receipt on one person's phone is not a filing system.
Why it matters
Failing to keep proper records is an offence under both ordinances and carries a fine. The more practical risk is an enquiry or field audit about a year you can no longer support: without the records, the assessor's figure tends to stand.
When the company closes
The obligation does not end with the business. Records still have to be kept for the full period after a company ceases or is deregistered, so decide before closing who will hold them.
General information, not advice on your own position. Every case turns on its own facts.