How Long to Keep Accounting Records in Hong Kong

How Long to Keep Accounting Records in Hong Kong (And What Happens If You Don’t)

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INTRODUCTION

What should you do with a five-year-old invoice from a supplier who no longer exists?

In Hong Kong, the answer is: keep it for at least two more years. The rules are clear, and they apply to every company regardless of size or industry.

Here is how long to keep what, and what happens if you fall short.

The 7-Year Rule

Hong Kong companies must keep accounting records for a minimum of 7 years. This obligation comes from two pieces of legislation.

The Companies Ordinance (Cap. 622) requires companies to keep accounting records for 7 years from the end of the financial period to which they relate. The Inland Revenue Ordinance (Cap. 112) requires taxpayers to keep records for 7 years to enable the IRD to verify their tax position.

We once met a founder who deleted records after the company closed, thinking they were no longer needed. The IRD reopened the assessment six months later. He had no documents to support his position and paid additional tax and penalties.

The 7-year period runs from the end of the accounting period, not from the date of the document.

What Records Must Be Kept

The 7-year retention requirement applies to a broad range of business documents, not just formal accounts.

Records you must retain include sales invoices and receipts issued to customers, purchase invoices and receipts from suppliers, bank statements and bank reconciliations, and payroll records and MPF contribution histories. Expense receipts and reimbursement records are also required.

Contracts and agreements with customers and suppliers, stock records and inventory counts, import and export documentation, and fixed asset registers are all essential. You must also keep the formal accounting records: general ledger, trial balance, and the financial statements themselves.

One founder kept physical records in a office drawer. A water leak destroyed two years of documents. He had to reconstruct everything. Keep multiple copies in different locations.

The seven-year requirement exists because of the IRD’s audit window. Understanding why the IRD cares about your records is part of the broader picture; read about accounting standards and compliance.

Statutory Records Held Separately

Accounting records are separate from statutory company records. Both must be retained, but under different rules.

Statutory records kept at your registered office or principal place of business include register of members, register of directors and company secretaries, copies of resolutions passed, and minutes of general meetings. Instruments of transfer of shares are also required.

The Companies Ordinance requires these statutory records to be kept indefinitely while the company is active, and for a period after dissolution. They are not the same as accounting records and the 7-year rule does not apply in the same way.

Store these separately from your accounting records.

Physical vs Digital Records

Hong Kong law does not require accounting records to be kept in physical form. Digital records are acceptable.

If you keep records digitally, they must be complete and unaltered, accessible for inspection if required by the IRD or Companies Registry, and capable of being printed in legible form. Scanned PDFs of original paper documents are acceptable. Cloud storage is acceptable provided the records can be retrieved reliably.

We worked with a founder using cloud storage that became inaccessible when the service shut down without warning. He lost years of digital records. The format matters less than the integrity and accessibility of the data. If you use accounting software, retain access to the historical data even if you switch software providers.

Migrating to a new platform and losing historical records is not a valid excuse for non-compliance.

What Happens If You Destroy Records Too Early

Destroying accounting records before the 7-year period ends is a criminal offence under the Companies Ordinance. Penalties include fines for the company and, in serious cases, personal liability for directors.

Under the Inland Revenue Ordinance, failure to keep records for 7 years can also result in the IRD estimating your profits or losses, issuing additional assessments based on estimated figures, and imposing penalties for negligent or wilful non-compliance. The IRD has the power to audit companies for up to 6 years after the relevant year of assessment.

Destroying records too early can trigger penalties. The IRD’s enforcement powers are substantial; we detail what happens in our post on tax penalties and enforcement.

Adequate records are your defence in any such review.

Practical Storage Tips for Founders

Keeping 7 years of records organised does not need to be complicated.

Simple system that works: create a folder for each financial year (e.g. “FY2025 April”), and within each year, separate folders for bank statements, invoices, expenses, payroll, and contracts. Scan physical documents immediately and save digitally, then back up digital records to at least one offsite location.

Cloud storage is fine for backup. Do not delete anything from a financial year folder until the 7-year period has clearly elapsed. At ABLE Hong Kong, we use cloud-based document management for all client records. Every document is tagged by financial year and category so nothing gets lost and audits take hours, not days.

When You Can Finally Delete Records

Once the 7-year period has passed from the end of the relevant accounting period, you are legally permitted to destroy the records.

Before you do, check whether any legal disputes are pending or possible where the records could be relevant, whether there are any ongoing IRD queries or audits relating to those years, and whether the records relate to assets still on your balance sheet.

For assets still on your books, related acquisition documents should be retained until the asset is disposed of.

This can extend well beyond the standard 7-year window.

Final Thoughts

Seven years sounds like a long time. In practice, with cloud storage and a simple folder structure, keeping records this long costs almost nothing.

The cost of not having them when the IRD asks for them is a different story. Set up a retention system from day one and make sure your accountant knows where everything is.

Review once a year whether any records have passed their retention date.

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