Hong Kong IRD Record Keeping Requirements

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Hong Kong IRD Record Keeping Requirements

Record Keeping - IRD

Hong Kong's Inland Revenue Department (IRD) mandates that businesses keep adequate records to accurately determine their assessable profits. Failure to do so can result in a maximum fine of HK$100,000. These requirements apply even after a business has ceased trading until the retention period has elapsed.

🕒 Retention Period

Businesses in Hong Kong must retain their financial records for a minimum of seven years from the date of the transaction. This applies to both businesses that are still operating and those that have ceased operations. For individuals, tax returns filed online are generally retained for seven years.

📚 Required Records

The IRD requires businesses to keep a comprehensive set of records to substantiate their financial reporting. This includes, but isn't limited to:

Accounting books that document all receipts, payments, income, and expenditures.
Source documents to verify accounting entries, such as vouchers, bank statements, invoices, and receipts.
Records of assets and liabilities related to the business.
A day-to-day record of all money received and spent.

💾 Record Keeping Methods

Businesses have the flexibility to keep their records in either paper or electronic format. The IRD allows for electronic storage methods, such as scanning documents and saving them on CD-ROMs or other digital formats. However, it's a good practice to keep the original source documents, like bank deposit slips and checkbooks, in case they're needed for verification.

How Bestar can Help

Engaging with professionals like Bestar can significantly help businesses in Hong Kong with their record-keeping obligations and overall tax compliance. Here's a breakdown of the key ways we can assist:

1. Expert Guidance and Compliance

Understanding Complex Regulations: Bestar is knowledgeable about the intricacies of the Inland Revenue Ordinance (IRO) and other relevant regulations. We can provide advice on how to properly record transactions, what documents to retain, and for how long, ensuring your business stays compliant and avoids penalties.
Advisory on Tax Policies: We can offer consultations on Hong Kong Financial Reporting Standards (HKFRS) and tax regulations, helping you navigate complex issues and make informed decisions.
Proactive Risk Management: Bestar can conduct "internal health checks" of your financial records to identify discrepancies and potential compliance issues before they become a problem. We can also represent you and negotiate with the IRD in case of a tax field audit or investigation.

2. Efficient and Accurate Record Management

Bookkeeping and Accounting Services: Bestar offers comprehensive services that include setting up a full accounting system, daily bookkeeping, and preparing annual financial statements. We can help you organize and manage all your business documents, from invoices and bank statements to receipts and vouchers.
Adopting Digital Solutions: Bestar can assist in transitioning from a paper-based system to an automated or digital one. We can help you set up and use accounting software like QuickBooks and implement a digital document management system, which can save time, reduce clutter, and improve accuracy.
Auditing and Financial Reporting: For limited companies, which are required to have an annual audit, Bestar can handle the preparation of financial statements and work with auditors to ensure a smooth and timely process. We can also help with the tax computation and submission of profits tax returns.

3. Strategic Tax Planning and Optimization

Maximizing Tax Benefits: Bestar can help you identify and claim all eligible deductions, allowances, and tax incentives. This includes a thorough analysis of your business to optimize your tax position and reduce tax liabilities.
Handling Offshore Claims: We can assist in preparing and substantiating offshore claims, helping your business benefit from Hong Kong's territorial tax system where applicable.
Strategic Tax Advice: Beyond basic compliance, Bestar can provide strategic advice on tax planning, structuring your business for tax efficiency, and handling cross-border tax matters.

4. Streamlined Processes

Meeting Deadlines: Bestar ensures that all tax filings and submissions, including the annual Profits Tax Return and Employer's Return, are completed accurately and on time, helping you avoid late penalties.
Focus on Your Core Business: By outsourcing your accounting and tax compliance needs, you can free up valuable time and resources to focus on what you do best—running and growing your business.

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