Hong Kong 2021 How to keep records for tax filing?

2021-01-22 11:56

How to keep records for tax filing?

Section 51C of the Inland Revenue Ordinance requires a taxpayer to keep sufficient records in the English or Chinese language of income and expenditure of the taxpayer to ascertain the assessable profits.  Failure to comply with the requirements of the Ordinance without reasonable excuse may be liable to a maximum fine of HK$100,000.    There are some useful tips for record keeping.

Form of records

The records can be kept in the paper-based method or in electronic means.

When the paper-based method of book keeping is used, please make sure to keep all records in a legible and well-organized manner.

Even if the records are keeping in electronic means, source documents such as cheque butts, invoices, bank deposit slips and bank statements are still to be kept to substantiate income and expenses. It is advised to backup all your electronic records regularly in order to avoid missing such records.

Other tips

* Records shall be retained for a period of not less than 7 years.

* It is recommended to use sequentially numbered sales invoices for goods or services in order to avoid missing invoices.

* Bank statements are a vital part of book keeping and should be safely filed away in date order. Be careful not to lose them as banks may charge on the re-print.

* Please ask for a receipt when paying business expense wherever possible. Receipts will help to prove accounts have been paid if queries arise later.

* Please keep records which can explain the trading stock on hand at the end of each accounting period. The stock-on-hand at the beginning and end of each year has to be taken into account in working out whether or not a business has an assessable profit.