Perspectives

Six years to life

Tax records: what to keep and how long to keep it

Every person who does business, or pays or collects taxes in Canada is required to keep records and books of account. This provides adequate support in the event of a review by the Canada Revenue Agency CRA. But what do you keep, in what format and for how long?

By Jeremy Bergen

Every person who does business, or pays or collects taxes in Canada is required to keep records and books of account. This provides adequate support in the event of a review by the Canada Revenue Agency CRA. But what do you keep, in what format and for how long?

Six years


For most individuals, corporations, partnerships and trusts, the Income Tax Act (ITA) states that records (including cheques, vouchers, receipts, accounting records, etc.) must be retained for six years from the end of the last taxation year to which the records and books of account relate. For a late tax return, this six-year period begins the day the tax return is filed.

However, a document may only become relevant for tax purposes years after it was created. For example, the statement of account for a property purchased in 1998 and sold in 2013 should be kept until 2019, as this document is relevant to the calculation of the capital gain that is taxable in 2013.

The cost base of assets such as an investment in a partnership or a mutual fund may change year-over-year, and the tax treatment of income and expenses may be different from the accounting treatment.

In addition to maintaining records to determine accounting income, it’s important to retain all records needed to calculate taxable income for six years from the year that they impact taxable income.

Electronic documents

Since 1998, documents can be stored electronically as long as they are retained in an electronically-readable format. Readable means accessible and useable, which may be a challenge as software upgrades can quickly make a document format obsolete. A statement of account that was received electronically on the purchase of a property in 1998 and sold in 2013 should still be accessible electronically to auditors in 2019, despite changes in technology.

The books and records must also be kept in Canada, as required under the ITA. The CRA has stated that electronic documents should be stored inside Canada, not just be accessible from Canada. The CRA can request access to the records and books of account in order to verify, audit and re-create transactions in sufficient detail to determine whether income taxes were calculated appropriately. The CRA can then issue an assessment that is deemed binding. If a person applies to have the assessment reviewed by the court, lack of documentation will likely cause the appeal to fail. This should be incentive enough to retain appropriate books and supporting documentation.

Back up your data assets

Data protection, duplication and backup are strongly suggested to preserve the integrity and accessibility of the books and records. This is just as important for individuals as it is for corporations and other business entities. For example, it is fairly common for an individual to appoint a power of attorney should their ability to handle their affairs diminish. As individuals lose capacity, they may also lose documents. Knowing how and where records are kept before an individual becomes unable to communicate and backing up those important documents may be crucial in supporting the annual final tax liability for that individual.

Life plus two

Some records must be kept for the life of the corporation plus two years. These documents include directors’ and shareholders’ minutes, share certificates and share transfer documents, the general ledger and special contracts or agreements necessary to understand the entries in the general ledger.

And finally, knowing what to keep, for how long and in what format helps minimize the cost of dealing with the inevitable accumulation of information that comes from doing business and paying taxes in Canada, and to provide adequate support in the event of a review by the CRA.

Jeremy Bergen is a senior manager with Deloitte in Langley, B.C., and specializes in the taxation of private corporations and their shareholders. 

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