The purpose of today’s note is to provide information to persons who are required by law to keep books and records in Canada. A person in the context of this note includes, in addition to individuals, a corporation, a trust, and other organizations such as a registered charity, a registered Canadian amateur athletic association, and a non-profit organization.
Also, a record is described by subsection 248(1) of the Income Tax Act to include an account, an agreement, a book, a chart or table, a diagram, a form, an image, an invoice, a letter, a map, a memorandum, a plan, a return, a statement, a telegram, a voucher, and any other thing containing information, whether written or in any other form.” In order not to exclude any possible record, Canada Revenue Agency (CRA) does not specify the format of the source documents to be kept. Rather, it describes, in general, their purpose; that is, to serve to substantiate and verify the information in the books and records. Thus, a source document can take the form of items such as sales invoices, purchase invoices, cash register receipts, formal contracts, credit card receipts, delivery slips, deposit slips, work orders, dockets, cheques, bank statements, tax returns, and general correspondence whether written or in any other form. CRA will also require other circumstantial supporting documents such as accountants working papers.
Generally, the books and records must be kept at the person’s place of business or residence in Canada and be available to officers of the CRA for audit purposes within and at all reasonable times. Books and records accessible electronically, but kept outside Canada do not conform to CRA requirements. Moreover, acceptable electronic records means to be those which are electronically readable and useable in a format that CRA auditors can process using CRA equipment (i.e. a software present in the auditor’s CRA computer). If the records are to be kept electronically, the taxpayer must ensure to also keep adequate software to access and print the information.
Current Income Tax Act regulations provides detailed times for specific retention periods for different sets of records. However, general retention periods are as follow:
- Under the Act, books, records, and their related accounts and source documents have to be kept for a minimum of six years from the end of the last tax year to which they relate. The tax year is the fiscal period for corporations and the calendar year for all other taxpayers.
- Also for a corporation, two years from the date of the dissolution of the corporation (in the case of corporations that amalgamate or merge, books and records have to be retained on the basis that the new corporation is a continuation of each amalgamating corporation).
- In the case of any non-incorporated business, six years from the end of the tax year in which the business ceased.
- For the duplicate donation receipts of a registered charity or registered Canadian amateur athletic association, other than receipts for donations of property which are to be held for a period of not less than ten years, two years from the end of the calendar year in which the donations were made.
- For other specified records of registered charities and registered Canadian amateur athletic associations, two years from the date the registration is revoked
- For records relating to political contributions, two years from the end of the calendar year to which they relate.
Let me know whether this information is useful to you or if you have any questions.