How long to keep business records in Canada: the CRA six-year rule and its exceptions

Generally, required records and supporting documents are kept for six years from the end of the last tax year they relate to. The tax year is the calendar year for an individual and the fiscal period for a corporation. A trust's tax year depends on its type.

The CRA says the retention rules are similar under the Income Tax Act, the Excise Tax Act (which includes the GST/HST), the Employment Insurance Act, the Canada Pension Plan, the Excise Act, 2001 and the Air Travellers Security Charge Act. One six-year habit covers income tax, GST/HST and payroll.

The count starts from the end of the last tax year a record relates to. A contract or a loan agreement that runs for years is kept until six years after the last year it matters to, not six years after it was signed.

The page also lists periods for a GST/HST tax adjustment note issued to a pension entity (six years from the day it was issued), for a revoked charity registration (two years from the revocation) and for agents of registered political parties. If your client is one of these, open the CRA page.

Records are organized accounting and financial documents that summarize the transactions, plus the documents that support them. The CRA's own list is long: ledgers, journals, financial statements, statements of account, income tax and GST/HST returns, sales invoices, purchase receipts, contracts, bank deposit slips, bank statements, cancelled cheques, cash register slips, credit card receipts, work orders, delivery slips, working papers, logbooks, emails and all correspondence that supports a transaction.

• Anyone who has to file a return, carries on a business, collects or pays tax or payroll deductions, or applies for a GST/HST rebate or refund has to keep records. The list also names payroll service providers and third-party record keepers.
• Holding companies and inactive corporations still keep records.
• Keep separate records for each of these situations.
• Records must be reliable and complete, include what is needed to meet tax obligations and calculate credits, be supported by documents, and be kept in English, French or both.

The responsibility stays with the person the records belong to. The CRA says you must protect your records even if you hire a third party to hold them, and RC188 says the owner is responsible for making sure adequate records are kept even when a bookkeeper, an accountant or an application service provider keeps them. The CRA must be able to see the records when it asks, including those held by third parties.

• Make sure the owner, an employee or the third-party record keeper is present when CRA officials examine the records at the address where they are kept, and that your representative cooperates and answers questions about the business.
• CRA officials may make copies or ask for copies of any record they need.
• The CRA recommends telling it about third-party changes that might affect the records, for example when they move to another provider.
• For internet transactions, keep the information yourself or a copy of it: web logs, confirmation emails, electronic signatures. A third party may not keep it for the period the law requires, even when transaction managers or other agents handle the sale.

The CRA accepts records kept on paper, on paper and later converted to a readable electronic format, or only in a readable electronic format.

• Born on paper. Keep the paper, unless it is saved as an acceptable image (electronic file, microfiche or microfilm). The image must be an accurate reproduction meant to replace the paper, give the same information, and not hide significant detail through limits in resolution, tonality or hue.
• Born electronic. Keep it in a readable electronic format, even if you have a paper printout.
• Throwing away scanned paper. If the imaging follows the standard the CRA names (the latest national standard of Canada, CGSB CAN/CGSB 72.34), the images become the permanent records and the paper can be destroyed. If the business cannot meet that standard, it keeps the originals. If you doubt it, the CRA says to get legal advice first.
• Systems. An electronic record must be supported by a system that produces records the CRA can reach and its software can read, and it stays readable after you change systems. If records are encrypted, the CRA must be able to get them decrypted.
• Backups. Always keep proper backup copies, preferably at a site in Canada other than the business location. Check that a backup can be restored in a usable form.

The CRA may also review the business systems: how information flows, what is retained and how reliable the controls are. It expects an audit trail, the information needed to recreate the sequence of events of a transaction, running from the supporting document (paper or electronic) to the summarized financial accounts. Point-of-sale, e-commerce, stock, payments, email and return-preparation software can all be part of it.

Records are kept at the place of business or at a residence in Canada, unless the CRA gives written permission to keep them elsewhere. A record kept outside Canada and reached electronically from Canada does not count as kept in Canada.

• To ask, write to the tax services office. The permission comes in writing and states its terms and conditions.
• With permission to keep electronic records outside Canada, the CRA may accept copies if it is satisfied they are true copies, they can be made available to CRA officials in Canada in a format its software can read, and they show enough detail to support the returns.
• If the records are on servers outside Canada, you must reach the servers, or have staff reach them, and give the CRA the electronic system records it needs.
• Registered charities and certain other bodies cannot get permission to keep records outside Canada.

This page does not say whether a particular accounting product stores data in Canada, and it is not a legal opinion on cloud storage. If a client's books sit on servers abroad, read the CRA page above and ask the tax services office or a lawyer.

• GST/HST. Records must describe the goods and services in enough detail to tell whether GST/HST applies, and let you calculate the tax to pay or collect and any refund, rebate or deduction from net tax. To claim an input tax credit, keep the purchase invoices or receipts. They must carry the specific information the CRA sets out, and your own sales invoices need the same, so that GST registrant customers can claim.
• Payroll. When you deduct income tax, CPP or EI, the records show the hours worked by each employee and the amounts withheld. Keep each employee's Form TD1, the Form TP-1015.3-V for employees working in Quebec, any CRA letters of authority that reduce deductions for a year, all information slips issued and returns filed, and registered pension information.
• Corporations also keep the minutes of directors' and shareholders' meetings, the information about share ownership and transfers, the general ledger or other books of final entry, the special contracts needed to understand its entries, and information on their internet business activities. Corporations in international non-arm's-length transactions keep all their transfer pricing documents.

To destroy books of account and records before the retention period ends, get the CRA's written permission first: fill in Form T137, Request for Destruction of Records, or apply in writing to the tax services office. You or an authorized representative can do it. Destroying paper or electronic records without permission may lead to prosecution.

The CRA can approve destruction only for records the laws it administers require. Other federal, provincial, territorial or municipal laws may require the same records for longer, and the CRA cannot waive them.

These are CRA rules. Revenu Québec and other provincial authorities have their own, and this page does not cover them.