Key Requirements for Keeping Primary Documents in Hong Kong (Record keeping): A Comprehensive Guide for Businesses

Proper management and storage of a company’s primary documents in Hong Kong is not only a legal obligation but also the foundation for sustainable and successful business operations. In today’s world, data is everything, and for businesses, accurate and transparent documentation is of utmost importance. 

Hong Kong, with its developed business environment, offers vast opportunities for companies but also requires strict compliance with reporting norms and regulations. Failure to meet these requirements can lead to serious financial and legal consequences. 

In this article, we will explore the key document retention requirements faced by companies in Hong Kong. Our experts have prepared practical recommendations for improving document management systems, which will help not only comply with legal requirements but also optimize business management. 

Necessity of Keeping Business Primary Documents in Hong Kong 

Keeping primary documents is not just a legal obligation but also a business management foundation that helps: 

• Control the validity or legality of the company’s cash flow. 
• Prevent business risks associated with lack of information or its inaccessibility. 

Keeping primary documents helps a company legally operate in the Hong Kong SAR and creates a healthy approach to business management and its “history.” This “history” may be required for submission to tax authorities, banks, investors, auditors, and internal control. 

Hong Kong tax legislation, specifically the Inland Revenue Ordinance (IRO), requires all companies to keep primary documentation of company activities in English or Chinese. These documents must be available for inspection at any time within 7 years from the date of the transaction. Failure to comply with this requirement may result in a fine of up to 100,000 HKD. 

If expenses and losses from previous periods reduce income in subsequent financial years, primary documents for such expenses must be kept not for 7 years from the transaction date but from the moment the expense was offset against income to reduce the taxable base. 

What Documents Must Be Retained 

Documents Confirming Company Income 

In Hong Kong, companies are required to keep primary documents confirming revenue and income to ensure accurate accounting and compliance with the Inland Revenue Ordinance. Here are the main types of documents that need to be retained: 

1. Invoices. Must contain the following information: 
   • Invoice number in a clear chronological order; 
   • Invoice date; 
   • Client’s name and address; 
   • Description of goods or services, their quantity, and cost; 
   • Total invoice amount. 

2. Bank Statements. Records of all transactions on the company’s bank accounts used for reconciling receipts. Includes acquiring transactions. 

3. Receipts. Confirms receipt of cash payment and contains: 
   • Payment date; 
   • Payment amount; 
   • Description and quantity of goods or services. 

4. Contracts, Agreements. Must contain: 
   • Name, address, and details of the parties; 
   • Subject of sale; 
   • Terms of sale; 
   • Payment terms; 
   • Obligations of the parties. 

5. Any other documents that confirm the sale of goods, works, services to clients. 

Documents Confirming Company Expenses 

In Hong Kong, companies are required to keep primary documents confirming expenses to ensure accurate accounting and compliance with tax requirements. Below are the main types of documents that need to be retained: 

1. Invoices: 
   • Invoice number; 
   • Invoice date; 
   • Supplier’s name and address; 
   • Payer’s name; 
   • Description of goods or services, their quantity, and cost; 
   • Total invoice amount. 

2. Bank Statements. Records of all transactions on the company’s bank accounts used for reconciling expenses. 

3. Receipts. Confirm the fact of cash payment. Must contain: 
   • Payment date; 
   • Payment amount; 
   • Description and quantity of purchased goods or services. 

4. Contracts, Agreements. Must contain: 
   • Name, address, and details of the parties; 
   • Subject of purchase; 
   • Purchase terms; 
   • Payment terms; 
   • Obligations of the parties. 

5. Credit and Debit Notes. Confirm adjustments in invoices and are used for accounting returns of goods or price adjustments. 

6. Lease and Rental Agreements. Confirm expenses for renting or leasing property. Include information on terms, conditions, and amounts of rental payments. 

7. Payroll Records. Records of all employee payments. Include information on amounts, dates, and recipients of payments. 

Documents Confirming Asset Accounting 

Every company is required to keep records of assets such as office equipment, vehicles, land, and buildings. This requires recording the purchase date, asset cost, and any improvement expenses. An asset register helps control the use of company resources and minimize losses. 

Example of Accounting for Acquired Company Assets 

Inventory and Cash 

All trading companies must conduct regular inventory at the end of the reporting period. This is important for determining profit and accurately calculating taxes. Inventory must also be documented for audit purposes. 

How to Store Primary Documents in Hong Kong 

Companies can choose one or more methods for storing documents simultaneously. 

1. Paper Storage 
   • Organize documents by category (e.g., invoices, receipts, bank statements) and store them in folders and files. 
   • Use archival boxes for long-term storage to protect documents from damage. 
   • Store important documents in safes to protect against theft or damage. 

2. Electronic Storage 
   • Convert paper documents to digital format through scanning. 
   • Use a hard drive, stationary server, or cloud services (e.g., Google Drive, Dropbox, others) for storing and accessing documents from anywhere. 
   • Regularly back up and create backups to minimize the risk of data loss. 

3. Accounting Software, Document Management Systems 
   • Use specialized programs for organizing accounting, storing, and searching documents.