How Long Do You Have to Keep Business Records in Canada?

Every August, somebody asks me if they can finally get rid of the 2019 box.

It’s a fair question. Storage costs money, filing cabinets take up a corner of an office that could be doing something better, and nobody wants to keep paper they don’t need. But the answer is usually not the one people expect, because the rule most owners carry around in their heads is only half right.

Here’s how record retention actually works in Canada.

The six year rule, and the date it starts from

CRA’s general requirement is that you keep your records and supporting documents for six years from the end of the last tax year they relate to.

Read that last part again, because it’s the part that catches people.

It is not six years from the date on the receipt. It’s six years from the end of the tax year the receipt belongs to.

Take a receipt dated March 2020, for a sole proprietor whose tax year is the calendar year:

→ The tax year that receipt belongs to ended December 31, 2020.

→ Six years from that date is December 31, 2026.

→ That receipt stays in the box until the end of this year.

If you counted from the date printed on the receipt instead, you would have shredded it in March of this year. Nine months early, and still inside the window where CRA could ask you to produce it.

For a corporation, the clock runs off your fiscal period rather than the calendar. If your year end is June 30, a receipt from March 2020 belongs to the tax year ending June 30, 2020, and six years takes you to June 30, 2026.

It’s a small distinction. It’s also the difference between having a document when somebody asks for it and not having it.

Why six years, when CRA only gets three or four to reassess?

This is the question I get right after the first one, and it’s a good one.

For most small businesses, CRA’s normal reassessment period is three years from the date it sent your original notice of assessment. It’s four years for a corporation that isn’t a Canadian-controlled private corporation.

So why keep records for six?

Because the normal period isn’t the only period. If you file a notice of objection, you hold the records until the matter is resolved. If losses or credits get carried back from a later year, the reassessment window on the earlier year stretches by another three years. And where CRA alleges misrepresentation from neglect, carelessness, wilful default or fraud, there’s no time limit at all.

Six years is the floor, not the ceiling. Treat it as the number that covers the ordinary case.

“Records” means a lot more than receipts

When people picture record keeping, they picture a shoebox. The actual requirement is broader.

CRA expects records containing the information needed to meet your tax obligations and calculate your credits, and it expects those records to be supported by documents. In practice:

→ Sales invoices and purchase invoices

→ Bank and credit card statements

→ Contracts and agreements

→ Payroll records

→ General ledger and journals

→ The supporting documents behind every number on the return

It also explicitly covers the digital trail. Internet based transactions count, and so do confirmation emails, web logs and electronic signatures. If you take payments through a third party processor, that transaction data is part of your records and the responsibility stays with you, not the processor. That one surprises people who assume Stripe or Square is quietly keeping it on their behalf.

Records also have to be reliable, complete, and kept in English or French.

The exceptions that override six years

Six years is the default. Several situations change it.

Property you bought or sold. Records relating to the acquisition and disposal of property are kept indefinitely. This is the one people get wrong most often after the start date. A purchase agreement from twelve years ago isn’t expired paperwork, it’s the basis for calculating a gain whenever that property leaves your hands.

A corporation that gets dissolved. Records are kept for two years after the date of dissolution.

An unincorporated business that closes. Six years from the end of its final tax year.

An objection or appeal in progress. Keep everything until the matter is settled and any appeal period has run, or until the six years is up, whichever comes later.

Can you scan it all and shred the paper?

Yes, with conditions attached.

CRA accepts imaged copies of paper source documents, and once they have been imaged to the required standard, the paper can be disposed of. The standard is a real, specific one: the Canadian General Standards Board publication on microfilm and electronic images as documentary evidence.

An acceptable imaging program is expected to include written authorization from someone in authority, documented procedures, a log of what was imaged and when and by whom, quality control so the images are legible and reproducible, and the equipment on hand to actually produce them on request.

For a small business, none of that needs to be elaborate. But “I photographed some of it and binned the rest” is not an imaging program, and it’s worth knowing the difference before the originals go in the recycling.

One practical note while we’re here, and this one has nothing to do with CRA. Thermal receipts fade. The slips from gas stations and parking meters can go completely blank inside a couple of years in a warm drawer. A faded receipt and no receipt amount to the same thing in an audit. Photograph those the day you get them, whatever else you do.

Where the records have to live

Records are expected to be kept at your place of business or your residence in Canada, unless CRA gives you written permission to do otherwise.

Electronic records held on servers outside Canada are a specific case and need CRA approval. If you have it, you’re expected to be able to produce true copies in Canada, in a readable electronic format.

This catches more businesses than it used to, because most of us keep our books in cloud software without ever asking which country the data sits in. If you don’t know where yours lives, it’s worth finding out.

Don’t destroy anything early without asking

If you want to get rid of records before the retention period is up, there’s a process for it. You file Form T137, or you write to your tax services office and ask for written permission.

Destroying records early without that permission can lead to prosecution. That’s CRA’s language, not mine. Given that the alternative is keeping a box in a closet a few months longer, it’s rarely a trade worth making.

The habit that makes all of this easy

The businesses that never have to think about any of this tend to do the same simple thing.

Once a year, after the return is filed, the year gets closed out. Everything for that tax year goes into one place, physical or digital, labelled with the tax year and the date it becomes eligible for destruction. Six years from the year end, not from today.

Then once a year you look at the oldest box, check whether anything in it touches property or an open dispute, and deal with it.

That’s the whole system. Ten minutes annually turns record retention from a nagging question into a calendar item.

The 2019 box, by the way. If your year end is December 31, that tax year closed on December 31, 2019, and six years took you to December 31, 2025. That one you can let go of.

It’s the 2020 box you were about to throw out by mistake.

This is general information about CRA’s record keeping requirements, not advice about your particular situation. How the rules apply depends on your business structure, your year end, and anything still open with CRA.