How Long Must You Keep Business Documents in Israel? A Small-Business Guide

Disclaimer: This guide is general information only - not legal or accounting advice. Before you destroy any documents, confirm the exact period for your case with your accountant and against the official text of the regulations.

In short: For a small business or self-employed person in Israel, the answer is almost always one number - seven years. The accounting records (invoices, receipts, books, payslips) are kept for seven years from the end of the tax year, or six years from filing the return, whichever is later. Only a handful of documents - asset ownership, contracts in force, company formation papers - are kept longer.

Who this guide is for

• Sole traders and small registered businesses asking "how long must I keep all this paperwork?"
• The self-employed and freelancers wanting to clear out a drawer full of old receipts
• Small family-business owners unsure what they're allowed to throw away
• Anyone employing a worker or two who needs to know how long to keep payslips and attendance

(Large, complex companies - your accountant handles this anyway. This guide is for the small business.)

The short answer: seven years

A business's accounting records - all the incoming and outgoing documentation, the books and the ledgers - must be kept:

Seven years from the end of the tax year they relate to, or six years from filing the annual return for that year - whichever is later.

This is set in section 25 of the Income Tax (Keeping of Books) instructions. In practice, for most small businesses it simply means: keep everything for seven years.

Retention at a glance

"7 years from the end of the tax year" is the practical rule; the exact wording is 7 years from the end of the tax year or 6 years from filing the return, whichever is later (see below).

When does the count start?

A common mistake is to count from the document's date. You count from the end of the tax year:

(If you filed the return late, the six-years-from-filing count can push the date out - and then that date governs.)

What the seven years covers

The rule covers almost everything a small business holds:

• Invoices and tax invoices - both received and issued
• Receipts - income and expenses
• Accounting books and ledgers - journal, cash book, customer and supplier ledgers
• Delivery notes and purchase orders
• VAT and income-tax returns and their supporting documents
• Payslips, the wage ledger and attendance records - these are part of the accounting system, so the same rule applies

By business type

• Exempt dealer (osek patur) - same rule: seven years for income and expense documents and the annual return. No periodic VAT returns, but the rest of the documentation is identical.
• Licensed dealer (osek murshe) - seven years, including the periodic VAT returns and their supporting documents.
• Small limited company - seven years for the accounting records, plus the incorporation documents (articles, minutes, shareholder register) for the company's entire life.

Employees: why it's also seven years

If you have employees, there's a second reason to keep their records for seven years: the limitation period for most wage claims is seven years. Even though the labour law itself only requires you to "maintain a wage ledger and provide a payslip" (section 24 of the Wage Protection Law) without naming a number of years, keeping seven years protects you if a former employee sues. Conveniently, that lines up exactly with the tax rule.

What happens if you don't keep them

Retention isn't a formality - it's your cheapest insurance. If a tax audit finds you have no documentation:

• Expenses with no supporting document may be disallowed - you pay more tax on a higher reported profit.
• Missing books can be rejected ("unacceptable books") - letting the assessing officer set an assessment by estimate, and potentially adding fines.
• Without payslips and attendance records it's hard to defend against an employee claim - and in many cases the burden of proof is on you, the employer.

What to keep longer than seven years

A few documents go beyond the rule - keep them for the "life" of the asset or obligation:

• Asset ownership records (vehicle, real estate, expensive equipment) - while you hold the asset, plus seven years after you sell it (for capital-gains calculation).
• Contracts and agreements - while in force, plus seven years after they end.
• Company formation documents - articles, minutes, shareholder register - for the company's entire life.
• Guarantees and warranty certificates - for the coverage period.

You can keep everything digitally

You don't need a wall of binders. You may scan the paper documents, keep only the file, and even destroy the paper - under precise conditions (Israel Tax Authority Circular 9/2013). See the full guide to scanning and destroying documents.

So the file is preserved identically and stays readable seven years from now, store it in the PDF/A archival format (all fonts embedded). See how to convert to PDF/A or go straight to the tool.

Common mistakes

• Counting from the document's date - count from the end of the tax year, not the date on the invoice.
• Binning payslips after a year - they are part of the accounting records; keep them seven years.
• Destroying paper without meeting the scanning conditions - without the two signatures and the conditions of Circular 9/2013, the paper is still mandatory.
• A file that won't open in five years - a proprietary format or a re-compressed JPG may fail to open. That's why PDF/A.

More guides that help

• Scanning documents and destroying the paper - when it's allowed
• Preparing PDF files for an Israeli court (Net HaMishpat)
• How to convert PDF to PDF/A - the archival format
• Scanned PDF not searchable? How to fix it
• Clean hidden info from a document before sending