Key Takeaways
- Freelancers and business owners need to keep receipts and accounting documents to prove business expenses in an audit.
- In Israel, accounting records and supporting documents must be kept for seven years from the end of the tax year, or six years from filing the annual report – whichever is later.
- Paper receipts, especially thermal ones, can fade, so it is important to scan and back them up in an organized way.
- Digital storage helps you find documents faster, reduce lost receipts and manage expenses more efficiently.
- On Keep's recommended plan, you upload receipts in a click, as a photo or a file, so your expenses stay organized in one place. A photo like this documents the expense, but on its own it does not replace the paper original.
The short answer is yes, absolutely. The longer and more important answer is that you're probably keeping them wrong. In an era where tax authorities recognize scanned documents under certain conditions, relying only on fading paper in shoeboxes no longer makes sense. Proper receipt storage is not just a legal obligation - it's your key to reducing tax liability and avoiding disallowed expenses in an audit.
Keeping receipts properly matters especially for freelancers, Osek Patur and Osek Murshe businesses, and small business owners with ongoing expenses. Every receipt kept in an organized way can help prove a business expense, lower taxable income and prevent a real expense from being disallowed simply for lack of documentation.
Why Does the State Insist on Your Paperwork?
For freelancers and business owners, every receipt for a business expense is essentially cash money. Israel's tax system is based on a simple principle: you pay tax only on profit (income minus expenses).
For the state to recognize a specific expense and reduce your taxable income, you must prove that the expense actually occurred and that it served to generate income. The receipt is your proof document. Without it, the Tax Assessor may not recognize the expense.
When you throw a receipt in the trash, you're essentially volunteering to pay more income tax and more National Insurance than you need to – and if you are an Osek Murshe and the document is a tax invoice, more VAT as well.
Put simply, a receipt is not just proof that you bought something. For the business, it is a supporting document that links the expense to the business activity. Without proper documentation, it is hard to show the money was spent for the business and not as a private expense.
The Seven-Year Rule: How Long to Keep?
Israeli law requires keeping accounting records and all supporting documents for seven years from the end of the tax year to which they relate, or six years from the date the annual report for that year was filed – whichever is later. For example, receipts from 2024 must be kept at least until the end of 2031, and longer if the 2024 annual report was filed late.
The reason is that the tax authorities may examine reports from past years and issue assessments for several years after they were filed – and in special cases, such as fraud or a report that was never filed, for longer. If you're required to present proof of an expense from past years and can't find it, the Tax Assessor may refuse to recognize the expense, and you'll have to pay the tax difference plus interest and linkage.
So the right approach is not to keep receipts only until the end of the year, but to build a long-term storage method. Organize documents by year, month and expense type, so that in an audit you can quickly pull out the relevant receipt or invoice.
The Digital Revolution: End of the Fading Paper Era
The big problem with paper receipts, especially those printed on thermal paper, is that they tend to fade and become illegible within a short time. A blank, white receipt is worthless when the day of reckoning comes.
Fortunately, Israeli lawmakers have adapted to the 21st century. An amendment to the Income Tax (Bookkeeping) Instructions, in force since 2013, allows paper documents you receive, such as supplier receipts and invoices, to be stored as scanned files instead of the physical original – provided the scan meets the requirements, among them: the file is legible and identical to the original, marked as a "scanned document" and signed with an approved electronic signature; a second person has checked the file against the original and signed with their own approved electronic signature; and the file is kept in a digital archive that meets the Instructions.
Backup matters: The transition to digital does not exempt you from responsibility. If you keep scanned documents instead of the originals, the Instructions require a digital archive with a backup-and-restore system and reasonable safeguards against intrusion and tampering. A computerized bookkeeping system also needs a quarterly backup kept in a separate location. Relying on a single copy is a dangerous gamble, so it is worth keeping an additional, separate backup – for example in a cloud system that backs up documents automatically.
Good digital storage is more than a random photo of a receipt on your phone. For a document to be useful later, it must be legible, complete, stored in a fixed place, linked to the right expense and backed up so it can be found years later.
What Exactly Do You Need to Keep?
The guiding principle is: if it's related to money coming in or going out of the business - keep it.
- External documentation: Any record of a business transaction you received from an outside party – for example a tax invoice, receipt, or other document received from a supplier for purchasing a product or service for the business. This includes fuel, office supplies, rent, electricity, internet, advertising, refreshments, and more.
- Internal documentation: Any record of a transaction the business itself made – for example copies of every tax invoice, receipt, or transaction invoice you issued to clients. Using a digital invoice system ensures a true copy is automatically saved in the cloud.
- Additional documents: Bank statements, credit card processing reports, business contracts, and lease agreements.
Beyond which receipts to keep, it also matters what they belong to. A receipt for fuel, advertising, equipment or software should be linked to a clear business expense. The better a receipt is organized by category, date and supplier, the easier it is to use in ongoing reporting and when working with your accountant or accounting system.
Old Management vs. New Management
| Feature | Old Method (Paper) | New Method (Digital) |
|---|---|---|
| Storage Method | Physical, in binders and boxes | Digital, in secure cloud |
| Durability | Low, paper fades and tears | High, as long as there is a backup |
| Storage Space | Takes up physical space | No physical space needed |
| Search Capability | Difficult, manual browsing | Instant, by date, amount, or vendor |
| Risk of Loss | High | Low, with an additional separate backup |
Important note: Even when the law allows scanning, the original cannot be destroyed right away. Destruction is allowed only once the conditions in the Instructions are met – among them, filing the annual report for that tax year. Before throwing an original away, check with your accountant that all the conditions are met.
The key difference between manual and digital storage is retrieval. In an audit or an internal review, it is not enough for a document to exist "somewhere". You need to find it quickly, know which expense it belongs to and present it clearly.
Keep's Solution: Photograph and Upload at the Time of Purchase
On Keep's recommended plan, you upload business expenses in a click: you photograph the receipt with your smartphone at the time of purchase, or upload it as a file. Your expenses are kept in one place together with your income, and every plan shows income, expenses and profit for any date range you choose.
Worth knowing: photographing a receipt and uploading it to an app helps you document the expense, but it does not by itself turn the photo into a "scanned document" under the Instructions. So you keep the paper original for the full retention period, unless the scan and the archive meet all the conditions in the Instructions and the conditions for destroying originals are met too. If in doubt, check with your accountant.
For a small business owner, the advantage is not only storing the receipt itself, but building a fixed routine: photograph in real time, save the document, link it to the expense and prevent paperwork from piling up at the end of the month or year.
Moving to Smart and Secure Management
The right question today is "how to keep receipts with minimum effort and maximum security." The transition to digital storage is a business imperative that saves time, space, and money, and helps you stay better organized with the tax authorities.
Keep's system was designed exactly for this purpose - to turn a burdensome bureaucratic task into a simple, regular routine: on the recommended plan, you upload each receipt in a click, as a photo or a file.
When keeping receipts becomes a natural part of ongoing management, it is easier to control expenses, understand where the business stands and avoid surprises at reporting time. Instead of hunting for receipts after the fact, the business works with organized records that are ready to use.
Frequently Asked Questions About Keeping Receipts
How long do I need to keep business receipts?
Receipts and accounting documents must be kept for seven years from the end of the tax year they relate to, or six years from the date the annual report for that year was filed – whichever is later. Organized storage lets you present supporting documents in an audit or review by the tax authorities.
Can I keep receipts in digital form only?
You can keep paper documents you received as scanned files instead of the originals, as long as the scan meets the requirements of the Income Tax (Bookkeeping) Instructions, among them: the file is legible and identical to the original, marked as a "scanned document" and signed with an approved electronic signature; a second person has confirmed with an approved electronic signature that it matches the original; and the file is kept in a digital archive that meets the Instructions. An ordinary phone photo does not meet these conditions on its own. The paper original may be destroyed only once the conditions in the Instructions are met, including filing the annual report for that year.
Which receipts do freelancers need to keep?
Keep every document related to the business's income or expenses: receipts, tax invoices, card-processing reports, bank statements, contracts, agreements and any other documents that can prove business activity.
What happens if a receipt is lost or has faded?
Without a valid supporting document, an expense can be hard to prove in an audit. That is why it is best to photograph and scan receipts as soon as you get them, especially thermal receipts, which fade quickly.
How does Keep help with keeping receipts?
On the recommended plan, Keep lets you upload receipts and business expenses in a click, as a photo or a file, and store them digitally in one place. This makes it easier to stay organized, find documents and manage the business's expenses over time.
