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Keeping RecordsRC4409(E) Rev. 06 If you have a visual impairment, you can get our publications and your personalized correspondence in braille, large print, or etext (CD or diskette), or on audio cassette or MP3. For details, visit our Web site at www.cra-arc.gc.ca/alternate or call 1-800-959-2221. Table of Contents
Before you startIs this guide for you?Use this guide if you are:
Forms and publicationsIf you need any forms or publications, visit our Web site at www.cra.gc.ca/forms. You may want to bookmark this address. You can also order forms and publications by calling us at 1-800-959-2221. Do you need more information?This guide uses plain language to explain the most common requirements for keeping books and records. If, after reading this guide, you need more information, call us at 1-800-959-5525. Teletypewriter usersIf you use a teletypewriter (TTY), you can call our toll free, bilingual enquiry service at 1-800-665-0354. Electronic mailing listsWe can notify you immediately about new information on payroll, electronic filing for businesses, and more. To subscribe, free of charge, visit our Web site at www.cra-arc.gc.ca/lists/. Chapter 1 - General InformationAll the information in this chapter applies to record keeping for income taxes, GST/HST, payroll, trusts, registered pensions, registered charities, registered Canadian amateur athletic associations, municipal corporations, hospitals, and non-profit organizations. This chapter applies to records in paper format, electronic format, or a combination of both. See Chapter 2, Chapter 3, and Chapter 4 for additional information on keeping electronic records, payroll records, and GST/HST records. Why should you keep complete and organized records?You are required by lawYou are required to keep complete and organized records as stated in the:
For further information see: www.cra.gc.ca/about/faq-e.html#taxact There are benefits for youComplete and organized records will:
Consequences of not keeping adequate recordsWe may disallow expenses that you are unable to support. Also, there are penalties if you:
See Information Circular IC78-10, Books and Records Retention/Destruction, and GST/HST Memorandum 15.1, General Requirements for Books and Records, for more information on possible penalties and legal action. What are records?Records are accounting and other financial documents that should be kept in an organized way. Records were traditionally kept in paper format, and were called "books and records". Today many kinds of electronic records are kept by computer systems. Records include ledgers, journals, vouchers, financial statements and accounts, and income tax records. They are generally supported by source documents. Records normally summarize the information contained in the source documents. Records can include a statement of account, a book, a chart or table, or a return. The records can be either in writing, on paper, or in an electronic format created by a computer system. Source documents reflect binding agreements between parties to transactions. They generally represent the proof of transactions and are relied upon whenever disagreements arise between the parties to the transaction. Source documents include sales invoices, purchase receipts, contracts, guarantees, bank deposit slips, and cancelled cheques. They also include cash register slips and credit card receipts, purchase orders, work orders, delivery slips, emails, and general correspondence in support of the transaction. Methods of keeping recordsThe CRA recognizes:
Supporting documents are required in each of the above cases and may be kept in either paper or electronic format (including electronic imaging formats). Records in paper formatYou have to retain all those records that are in paper format, unless you retain them in acceptable microfiche, microfilm, or electronic image formats. Electronic imaging software is a popular method of keeping scanned images of paper documents, books, or records. See Chapter 2 for details on acceptable electronic imaging or microfilming of source documents. Records in electronic formatWe consider you to have electronic records if you create, process, maintain, and store your information in an electronic format. You are required to retain your electronic records in an electronically readable format, even if you have paper printouts of the electronic records. If any of your source documents are initially created, transmitted, or received electronically, they must be retained in an electronic format. Scanned images of paper documents, records, or books of account that are maintained in electronic format are acceptable if proper imaging practices are followed and documented. See Chapter 2 for more information on electronic record keeping. Who has to keep records?In this guide, "person" includes any individual, partnership, corporation, or trust. Adequate records have to be kept by:
Note
Requirements for recordsAs a general rule, the CRA does not specify the records you need to keep. Your records, whether in paper or electronic format, have to:
Note See Chapter 2 for additional requirements for electronic records. What additional records do corporations have to keep?In addition to the above "Requirements for records," corporations have to keep:
Corporations should also retain related documentation to support their transactions. This is particularly important for businesses engaged in international non-arm's-length transactions. These businesses should retain documentation related to their transfer pricing policies. What additional records do trusts have to keep?In addition to the above "Requirements for records," trusts have to keep:
What additional records do registered charities and registered Canadian amateur athletic associations have to keep?The "Requirements for records" listed earlier in this chapter apply to all registered charities and registered Canadian amateur athletic associations. In addition, they have to keep records:
What additional records do registered agents for registered political parties or official agents for candidates in a federal election have to keep?See Information Circular IC75-2, Contributions to a Registered Party, a Registered Association or to a Candidate at a Federal Election. It describes the documents that the agents have to keep to support the monetary contributions they receive and the expenditures they make. Your responsibilities for record keepingThe following responsibilities are in addition to the "Requirements for records" listed earlier in this chapter:
See "Audit trails required for electronic records" in Chapter 2. Where do you have to keep your records?Your records must be kept at your place of business or at your residence in Canada, unless we give you permission to maintain them elsewhere. To request permission, write to your tax services office. After conducting a review, we will let you know in writing whether or not we have given you permission, and what, if any, terms and conditions apply. Where we have given you permission to maintain your records outside of Canada, they must be made available in Canada for review by CRA upon request. Otherwise, you must allow CRA officials to review the records by traveling to the country where they are maintained at the expense of your business. Exception See "Where do you have to keep your electronic records?" in Chapter 2 for additional information about electronic records. How long do you need to keep your records?As a general rule, you must keep all of the records and supporting documents that are required to determine your tax obligations and entitlements for a period of six years from the end of the last tax year to which they relate. The six-year retention period under the ITA begins at the end of the tax year to which the records relate. The tax year is the fiscal period for corporations and the calendar year for all other taxpayers. The rules are similar for GST/HST under the ETA, as well as for the EIA, the CPP, the EA 2001, and the ATSCA. Records and supporting documents concerning long-term acquisitions and disposal of property, the share registry, and other historical information that would have an impact upon sale or liquidation or wind-up of the business must be kept indefinitely. Note The following are special situations:
Note For more information, visit our Web site at www.cra-arc.gc.ca/tax/individuals/life-events/death or consult guide T4011, Preparing Returns for Deceased Persons and T4013, T3 - Trust Guide.
Destroying records earlyYou may destroy your books of account and records at an earlier time than outlined above if you receive written permission from the CRA. To get such permission, you (or an authorized representative) can:
Note If you destroy paper or electronic records without the express permission of the CRA, you may be subject to prosecution. Chapter 2 - Keeping Electronic RecordsWhat is electronic record keeping?Keeping electronic records means using electronic business systems to create, process, store, maintain, and provide access to the financial records of a person. These systems include, but are not limited to:
Electronic records may be stored on a computer, a network of computers, or computers held by third parties. They can also be stored on diskettes, CDs, DVDs, tapes, or cartridges. The computers and other storage devices may be located on your premises or elsewhere if the business or other organization operates in a Local Area Network or a Wide Area Network environment. The electronic records may also be maintained on a computer file server or on server space that is outside the premises. Your electronic records must meet the requirements for all records, as listed in Chapter 1. What is eCommerce?Electronic commerce (eCommerce) can be broadly defined as the delivery of information, products, services, or payments by computer (including the Internet), by telephone, or other electronic media. It includes the many kinds of activities that are being conducted electronically. It is much more than the purchasing of goods and services electronically. eCommerce includes any transaction using:
Requirements for electronic record keeping including eCommerce recordsIn addition to the "Requirements for records" in Chapter 1 you must ensure that:
Note Electronically readable format means information supported by a system capable of producing accessible and useable copy. If requested by CRA officials, you must be able to decrypt or unlock password-protected records and provide us with a copy of your electronic records in a useable format. Useable format means that the electronic records can be processed and analyzed with CRA software. The useable copy of the electronic records must be in a non-proprietary, commonly used data interchange format, which is compatible with software used by the CRA. Non-proprietary, commonly used data interchange format means those formats that allow files to be used with various software. For information on the types of commonly used file formats, call us at 1‑800‑959‑5525. Doing business on the InternetIf you use the Internet to carry on your business, your requirements and responsibilities are the same as those of regular businesses or other organizations as listed in Chapter 1 and Chapter 2. In addition, you are responsible for retaining additional information generated by Internet-based transactions. This information forms an important part of the audit trail and is relevant for tax purposes. The information is generated either:
If your business or other organization operates on the Internet and utilizes the services of transaction managers, Application Service Providers (ASP), re-billers, and other agents, you are responsible for ensuring this information is available. We suggest that you retain this information or copies of this information as part of your records as these third parties may not retain your records for the period required by the CRA. Backing up electronic filesYou should make backup copies of all your business information that has been recorded on rewritable media, such as computer hard disks, floppy disks, CDs, DVDs, tapes, and cartridges. This will ensure that you do not accidentally lose, delete, or erase this information. You should store the media containing the recorded information in an environment free from hazards that could affect the media. These hazards include magnetic fields, direct light, excessive moisture, and temperature extremes. When you retain back up records in a different medium, you should follow the media manufacturer's suggested procedures. You should give particular attention to the suggested shelf life of the medium. If you contract with an outside party for the retention of your electronic records, you are responsible for ensuring that they are available to CRA officials on request. Requirements for backing up electronic filesWhen you retain backups of your electronic files, you have to ensure that the backed up data files can be restored in a format that will be accessible and useable by the CRA. (See previous information on commonly used formats that can be accessed by CRA equipment.) See Information Circular IC05-1, Electronic Record Keeping, and GST/HST Memorandum 15.2, Computerized Records, for further information on ensuring the availability and reliability of backed up data. ImagingWhat is imaging?Imaging means generating a readable reproduction of the original paper source document. The images can be produced by scanning the paper source documents to electronic files or by creating microfiche or microfilm. Imaging a paper source document generally involves:
Requirements for an acceptable imaging programYou must keep the original version of records. You may, however, produce an electronic image of a paper document, which then can be accepted as the original record provided you follow certain procedures. Imaging and microfilm (including microfiche) reproductions of books of original entry and source documents have to be produced, controlled, and maintained according to the latest national standard of Canada. For more information, see Information Circular IC78-10, Books and Records Retention/Destruction, and GST/HST Memorandum 15.1, General Requirements for Books and Records. Also, refer to the Canadian General Standards Board (CGSB) publication, CAN/CGSB 72.11, Microfilm and Electronic Images as Documentary Evidence, and its latest amendment. Businesses using commercial software for smaller scale electronic scanning of their paper records and supporting documents should ensure that their scanned records meet the rules and guidelines set out in the latest national standard of Canada. You can destroy paper books of account and source documents if they have been imaged in accordance with the above CGSB publication. These images become the permanent records. If you have any doubt, obtain legal advice first. If businesses cannot meet the Canadian General Standards, they must keep their original records. The standards are available to view at selected libraries in Canada. The standards are also available for purchase from the CGSB: By mail: Sales Centre In person: Place du Portage Phase 3, 6B1 By Internet: http://www.pwgsc.gc.ca/cgsb/home/estore-e.html By telephone, fax, or e-mail: National Capital Region: 819-956-0425 Fax: 819-956-5644 E-mail: ncr.cgsb-ongc@pwgsc.gc.ca Managing electronic records and imagesWhen original source documents and records are created and maintained in electronic format, they must be kept in an electronically readable format. To ensure record availability, the original systems records, reports, and images of the reports generated also must be maintained for the required time period, usually six years. This also applies to situations where the original records and source documents were subsequently transferred to another medium such as electronically scanned images. Electronic records, required to assist you in fulfilling your tax obligations and to calculate your entitlements, should be consistent with the principles outlined in the Canadian General Standards. To ensure the reliability, integrity and authenticity of your electronic records, consult the national standard publication, CAN/CGSB 72.34, Electronic Records as Documentary Evidence. It will outline electronic record management policies, procedures, practices and documentation that will assist you in establishing the legal validity of your electronic records. Retention and disposal of electronic recordsYou must retain your electronic books, records, and images in electronically readable format for the same periods given in Chapter 1 under "How long do you need to keep your records?" and "Destroying records early." Business systems evaluationThe CRA may undertake a review of your business systems to:
As part of your obligation to provide reasonable assistance to the CRA, you must, on request, provide information on your business systems. For further information on business systems, consult Information Circular IC05-1, Electronic Record Keeping. Audit trails required for electronic recordsAn audit trail is the information that is required to recreate a sequence of events related to a business transaction. The electronic records must show an audit trail from the source documents, whether paper or electronic, to the summarized financial accounts. In addition, the trail may include a number of links to other associated processes and events, each of which may have its own audit trails. These include front-end systems (for example, eCommerce and Point of Sale), receipts, payments, stock inventories, preparation software for income tax and GST/HST returns, and email systems. For example, in Internet-based e-commerce transactions, certain records could be an important part of the audit trail. These include Web logs; emails when used as part of the transaction; invoices and confirmations; and security measures such as digital signatures. For transactions that are covered by an Electronic Data Interchange (EDI) trading agreement, the electronic record(s) including functional acknowledgments must be retained. Where do you have to keep your electronic records?See Chapter 1 for the places where you have to keep your records. In addition, records kept outside Canada and accessed electronically from Canada are not considered to be records in Canada. However, if the electronic records are maintained outside Canada, the CRA may accept copies if:
If your systems are maintained on servers located outside Canada, you should access the servers or arrange for your staff to access the servers and provide systems electronic records as required by CRA officials. Do you need advice?Call us at 1-800-959-5525 if you need information and advice on:
Do you need more information?For more information on electronic record keeping, consult Information Circular IC05-1, Electronic Record Keeping, and GST/HST Memorandum 15.2, Computerized Records. Chapter 3 - Payroll RecordsThe requirements in Chapter 1 and Chapter 2 also apply to payroll records. In addition, if you are an employer or payer who has to withhold or deduct CPP contributions, EI premiums, and income tax from remuneration or other amounts you pay, you must keep records that:
You also have to keep the following records:
You must keep all these payroll records so that CRA officials can audit or examine them, on request. Businesses using third parties to handle the payroll functions are still responsible for maintaining records for the time period specified in Chapter 1, generally six years. Payroll records may be kept in either paper or electronic format. We recommend that electronic copies of your records be maintained at your business location. For further information, see guide T4001, Employers' Guide - Payroll Deductions - Basic Informationand Remittances or visit our Web site at www.cra.gc.ca/payroll/. Chapter 4 - GST/HSTRecord keeping requirementsAll the requirements in Chapter 1 and Chapter 2 also apply to GST/HST records. You have to keep adequate records if you are:
In addition, if you are required to file a GST/HST return, you must ensure that your records describe the goods and services being traded in sufficient detail to determine whether they are subject to GST/HST. Your records also have to allow you to calculate:
As stated in Chapter 1, you must keep your records for a period of six years from the end of the last year to which they relate. You must keep all your records, including both paper documents and electronically stored documents, in Canada or make them available to CRA officials in Canada on request. If you wish to maintain your records at a specific location outside Canada or if you are a non-resident, you should contact your tax services office in writing to request permission. See Chapter 1 for more information. Invoice requirementsGST/HST registrants who make taxable supplies must disclose to purchasers that the tax has been charged:
Requirements to support a claim for an input tax credit (ITC)If you are a GST/HST registrant, you must get and keep with your records the documentation to support your claim for an ITC. The documents include invoices, receipts, or contracts, which must contain specific information depending on the amount of the purchase. You also have to provide the same information to your customers who are GST/HST registrants to support their claims for an ITC. Did you know that the new online registry at www.cra.gc.ca/gsthstregistry allows you to verify the GST/HST numbers of your suppliers? For more details on the information required, see the following chart:
ReferencesAdditional information can be found in the following publications, which are also available at www.cra.gc.ca/forms:
Index
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