Electronic records

What counts and how long to keep it

The CRA describes an electronic record as any information recorded in an electronically readable format. That covers the data inside accounting software, point-of-sale and online store systems, and documents that were created or received electronically, such as emailed invoices, credit card receipts and online statements.

The general retention period is six years from the end of the last tax year the records relate to. For a corporation the tax year is its fiscal period. Records about property you buy and sell, or the share registry, may need to be kept longer, so ask before discarding old files.

Source documents still matter

Keeping the ledger is not enough. The CRA’s guidance says taxpayers who keep electronic records must also keep source documents such as sales and purchase invoices, receipts, contracts, deposit slips, cheques and bank statements. Documents first received electronically are generally kept electronically. Paper records may be kept as electronic images in line with CRA policy.

The records should show a trail from those documents to the summarized figures in your accounts. If a total on your return cannot be traced to its pieces, the records are weaker than they look.

An illustrative example

A business pays an annual software subscription of $600 and receives the invoice by email. The invoice is saved in a shared folder named by year, the payment is matched in the ledger, and the ledger entry points to the file. Two years later the accounting software is replaced. Because the invoice file and an export of the old ledger were kept in a commonly used format, the expense can still be supported. The amount is round and ignores sales tax.

Risks to manage

Records stored on servers outside Canada are not treated as records kept in Canada, although the CRA may accept copies made available in Canada in a usable format. Your responsibility is not removed because an accountant, bookkeeper or software provider holds the data. Changes to recorded transactions should be made by a documented journal entry, and lost or damaged records should be reported to the CRA and recreated within a reasonable time.

Before changing systems, make sure you can still reach and read the old data and that it can be exported in a non-proprietary format.

What to discuss with your accountant

Ask where your records are stored, who has access, how often they are backed up and tested, and how you would produce them if the CRA asked. Confirm what happens to data if you cancel a subscription or switch providers.