Hong Kong is famously light-touch, but on this one thing the law is blunt. Two laws apply to a limited company, the Inland Revenue Ordinance and the Companies Ordinance, and they ask for overlapping but not identical things. Every figure below is linked to the official page it came from.
The rule
Section 51C of the Inland Revenue Ordinance requires every person carrying on a trade, profession or business in Hong Kong to keep sufficient records, in English or Chinese, of income and expenditure so that assessable profits can be readily ascertained, and to retain them for not less than 7 years [1]. The IRD's guide puts the clock at seven years from the transaction date, and the duty continues after you cease trading until that period has run [2]. Failing to comply without reasonable excuse carries a maximum fine of $100,000 [1] [3].
The Companies Ordinance adds its own duty for incorporated companies. Section 373 requires a company to keep accounting records sufficient to show and explain its transactions, to disclose with reasonable accuracy, at any time, its financial position and financial performance, and to enable the directors to ensure the financial statements comply with the Ordinance [4]. Section 377 requires the company to preserve them for 7 years after the end of the financial year to which the last entry relates [4]. Note the words "at any time": the Companies Ordinance expects records that are current, not reconstructed at year-end.
| Rule | What applies | Source |
|---|---|---|
| How long to keep business records (Inland Revenue Ordinance, s51C) | Not less than 7 years | [1] |
| When the 7 years start (IRD guide) | From the transaction date; the duty continues after you stop trading | [2] |
| Losses set off in later years (IRD guide) | A good idea to keep records until 7 years after the year the losses are fully set off | [2] |
| Language of the records | English or Chinese | [1] |
| Maximum fine for failing to keep them without reasonable excuse (s80(1A)) | $100,000 | [1] [3] |
| Company accounting records (Companies Ordinance, s373) | Daily entries of all sums received and expended, and a record of assets and liabilities | [4] |
| How long a company preserves them (Companies Ordinance, s377) | 7 years after the end of the financial year to which the last entry relates | [4] |
| Director failing to take all reasonable steps to comply (s373(5), s377(3)) | Fine of $300,000 | [4] |
| Director wilfully failing to take those steps (s373(6), s377(4)) | Fine of $300,000 and imprisonment for 12 months | [4] |
What counts as "records"
The IRD's guide is specific. To confirm your calculations, your business records must include [2]:
- the books of account recording receipts and payments, or income and expenditure;
- the underlying documentation needed to verify those entries, such as vouchers, bank statements, invoices and receipts;
- a record of the assets and liabilities of the business;
- a day by day record of all sums of money received and expended, with supporting details of the receipts or payments.
At the end of each year you also keep lists of debtors and creditors and stocktake figures [2]. A business dealing in goods keeps full particulars of goods bought and sold, with invoices showing the goods, the buyers and the sellers in enough detail for the Commissioner to verify quantities, values and identities; retail trades normally conducted in cash have a concession on recording buyers, but must still keep full purchase records and a day by day record of money in and out [2]. A service business keeps a record of all services provided, traceable through the books to the statement of income and expenditure [2].
The test is not "did you keep something". It is whether a third party, the IRD or an auditor, could readily work out your profits from what you kept, and, for a company, whether the records show its financial position at any time [1] [4].
What sufficient records means in practice
The law does not name a bookkeeping method. A paper cash book can satisfy it at very small scale, and so can a computer system, but the IRD is clear that even if you keep your records on computer you must still keep the source documents, such as invoices, bank deposit slips and bank statements, to substantiate income and expenses, and you must back the system up [2]. It also recommends separate bank accounts for business and personal money, and if they are not separate, recording separately any money you put in and any private expenses paid from the account [2].
Two habits follow. Bank all business income into the business account, so the bank statement is a complete second record of every receipt. And match every line on that statement to an entry in the books, so nothing is in one and missing from the other.
A practical month-end routine
The IRD's own advice is to make bookkeeping part of your regular routine, keep it up to date and not leave things until the last minute [2]. Here is a routine that keeps a small company inside both laws all year, ending in a return built from closed books:
- Record money in and out as it happens. Who: whoever keeps the books. By when: daily, because both laws ask for day by day entries of sums received and expended [2] [4].
- File the source document with each entry. Who: the person who spent or received the money. By when: the same week; an invoice or receipt for every entry is what lets a third party verify it [2].
- Reconcile every bank account to its statement. Who: the bookkeeper. By when: at each month end, before the next month's entries start.
- Review debtors and creditors. Who: the owner or finance lead. By when: at each month end, so the year-end lists the IRD expects are a print-out rather than a project [2].
- Update the asset register and, for a goods business, stock records. Who: the bookkeeper. By when: monthly, with a full stocktake at the accounting year-end [2].
- Back up the books and the documents. Who: whoever runs the system. By when: monthly at the least [2].
- At the accounting year-end, close the year for the auditor. Who: the directors, with the bookkeeper. By when: soon after the accounting date, so the audited accounts and tax computation that support the BIR51 (corporation) or BIR52 (partnership) can be prepared in time; see our profits tax return guide for that timetable.
Why spreadsheets stop working
A spreadsheet can satisfy the law at very small scale. It fails in predictable ways as you grow: single-entry records that cannot prove completeness, no reconciliation against the bank, formulas silently broken by an edit, and no audit trail of who changed what. The year the business gets busy is exactly the year the records fall behind, and the first profits tax return covers everything since day one. A Companies Ordinance duty to show the financial position "at any time" is hard to meet from a spreadsheet updated once a quarter [4].
Penalties
Under the Inland Revenue Ordinance, failing to keep business records under section 51C without reasonable excuse can be prosecuted under section 80(1A), subject to a fine of $100,000, and the court may order the person to do what they failed to do within a specified time [3]. Preparing or maintaining false books of accounts or records wilfully, with intent to evade tax, is a different offence under section 82(1), subject to a fine of $50,000, a further fine of treble the amount of the tax undercharged and 3-year imprisonment [3].
Under the Companies Ordinance, the liability lands on the directors personally. A director who fails to take all reasonable steps to secure that the company keeps its accounting records, or preserves them for the 7 years, is liable to a fine of $300,000, and to imprisonment for 12 months as well if the failure is wilful [4]. It is a defence for a director to show they had reasonable grounds to believe a competent and reliable person was charged with that duty and in a position to discharge it [4], which is one more reason to know who keeps your books and how.
What good looks like
A proper double-entry ledger, reconciled to the bank as transactions happen, with every entry traceable to a document. Kept that way, the year-end is an event measured in hours: the auditor gets a closed trial balance, the tax computation follows from the books, and the seven-year archive builds itself.
How Suma handles this
Suma is the record-keeping system, not your tax filer. This is what it does today towards the duties above:
- Double-entry books with 4-digit account codes, where every edit is a void and a re-create, so the trail of who changed what is kept rather than overwritten.
- A bank feed through Finverse that brings business bank lines into the books as they happen, ready to reconcile.
- Receipts and documents vaulted against the books, so each entry keeps the source document that substantiates it.
- A year-end pack exported to our partner CPA firm, with more than 40 years in practice, under a hash the server computes.
- A filed year locked against edits, so the records behind a filed year stay as they were filed.
- Auditor questions answered on your request desk, with the receipt attached to the answer.
Frequently asked questions
How long do you have to keep business records in Hong Kong?
At least 7 years. The Inland Revenue Ordinance requires records to be retained for not less than 7 years [1], which the IRD's guide counts from the transaction date [2]. A company must also preserve its accounting records for 7 years after the end of the financial year to which the last entry relates [4]. If losses are being carried forward, the IRD suggests keeping the records until 7 years after the year in which the losses are fully set off [2].
What are the bookkeeping requirements for a small company in Hong Kong?
Size does not change the rule. A small company keeps books of account, the documents behind every entry, a record of assets and liabilities and a day by day record of money received and spent, in English or Chinese [1] [2]. The Companies Ordinance adds that the records must show the company's financial position with reasonable accuracy at any time [4]. The audited accounts and tax return are then prepared from those records.
Can I keep my business records only on a computer?
You can keep your books on a computer, and the IRD lists the advantages, but you must still keep source documents such as invoices, bank deposit slips and bank statements to substantiate income and expenses, and back the system up regularly [2]. Keeping everything on one machine with no backup is the risk the IRD calls out.
What is the fine for not keeping proper records in Hong Kong?
Under the Inland Revenue Ordinance, failing to keep sufficient business records without reasonable excuse carries a maximum fine of $100,000 [1]. Under the Companies Ordinance, a director who fails to take all reasonable steps to make the company keep or preserve its accounting records is liable to a fine of $300,000, with 12 months' imprisonment added where the failure is wilful [4].
General information current as of 15 October 2026. This is not legal, tax or accounting advice. Confirm the current requirements with the IRD, the Companies Registry or a licensed practitioner.