According to Article 51C of the Inland Revenue Ordinance, all taxpayers operating in Hong Kong must keep all business records for at least 7 years. If the taxpayer fails to comply, the maximum fine is $100,000.

In the case of business operating losses, the losses suffered will be offset by the profits of the following year, if any. If the loss may not be fully offset for more than 7 years in the future, the taxpayer will be advised to keep business records for more than 7 years until the loss is fully offset.

The Inland Revenue Department will not immediately issue tax-adjusted loss notices for companies that have suffered losses during the initial or long-term establishment period. Even if the taxpayer does not agree with the loss amount, he cannot object to it. If the amount of the loss will not be fully offset until the Inland Revenue Department issued the tax assessment year to the company for more than 7 years in the future, the taxpayer may have to wait more than 7 years before he can object to the original loss notice. At this time, the taxpayer may no longer keep the relevant business records.

In the case of more than 7 years, if necessary, the tax bureau will still require the taxpayer to provide business records from 7 years ago to formally determine the amount of the original loss. If the taxpayer fails to provide it, the Inland Revenue Department may not agree to the taxpayer The loss reported at the time. Therefore, taxpayers are requested to keep business records for more than 7 years in similar situations.

The above information is for reference only. If in doubt, we welcome your tax inquiries

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