The law for records retention in Canada stipulates that all businesses, partnerships, corporations, organizations and trusts must keep adequate records. Essentially, if you are operating a business or engaged in a commercial activity in Canada, you are required by law to keep records that provide enough details to determine your tax obligations and entitlements. Furthermore, all records must be supported by original documents.
The penalty for failing to adhere to record retention regulations in Canada can result in penalization, including fines and other legal repercussions. To help you avoid such penalties and ensure records are kept properly, we’ve compiled a list of need-to-know items including the types of records you should keep, and for how long.
Types of Records
According to the CRA, the following methods can be used for maintaining business records:
Books, records, and supporting documents in paper format
Books, records, and supporting documents converted from paper to electronically accessible and readable format
Electronic records and supporting documents produced and kept in an electronically accessible and readable format
All records must be kept within Canada, and must be made available to representatives of the Canada Revenue Agency when requested.
Record Keeping Requirements
Records retention laws in Canada require that you keep all information that will assist in fulfilling tax obligations and aid in calculating your entitlements. You must also keep and present other documents including :
income tax and goods and services tax/harmonized sales tax (HST) tax returns
scientific research and experimental development records
other documentation if applicable
How Long Should I Keep Records?
Typically, businesses are required to keep records for six years. Specialty records, particularly historical information that would have an impact upon sale or liquidation of the business (long-term acquisitions, the share registry, etc.), must be retained indefinitely.
In instances where they are given written permission by the CRA, businesses may destroy records before the six year period is reached.
Record Retention Made Simple
As already discussed above, failure to retain records for the required six years can result in fines and other forms of prosecution. Thus, ensuring that your business records are properly managed is of critical importance.
To this end, businesses may want to consider implementing a formal document retention policy administered via a document management system, to help ensure that they are in compliance with the law at all times. This can help not only from a legal perspective, but also service business and operational needs by improving company-wide document management processes.