Retaining financial records can be a daunting task, especially if you’re not sure how long you should keep them. In Canada, there are certain rules and regulations that determine how long to keep financial records. Understanding these rules is important to ensure that you comply with the law and avoid potential penalties or problems. This article will explain the rules for retaining financial records in Canada and help you determine how long to keep them.
How Long To Keep Business Documents
It is recommended that all relevant business records be kept for a minimum of 6-7 years in Canada. Canadian tax records must be kept for a shorter period of time than their U.S. counterparts; be sure to abide by CRA regulations rather than IRS rules. The Canada Revenue Agency states that businesses and individuals only need to preserve records relating to taxes and business operations for a period of six years. If you wait until the last minute to file your taxes, the six-year clock doesn’t start ticking until you actually submit your return. Most experts agree that seven years is the minimum amount of time to maintain all relevant paperwork, just in case.
Where To Keep Your Records
Unless the Canada Revenue Agency (CRA) provides you explicit permission to retain them elsewhere, you must keep financial records at your place of business or home in Canada.
Documents stored electronically outside of Canada but accessible from within the country do not qualify as “Canadian records.”
If you fall into any of the following categories, the CRA will not allow you to maintain records outside of Canada:
Non-profit organizations that are officially recognized by the government
- Registered Canadian amateur athletic associations
- Canadian municipalities
- Institutions of the public sector that carry out a governmental role
- Canadian non-profit housing corporations that meet the residency and income criteria for exemption from taxation under Part 1 of the Income Tax Act
Unless the Canada Revenue Agency (CRA) provides you explicit permission to retain them elsewhere, you must keep financial records at your place of business or home in Canada.
Documents stored electronically outside of Canada but accessible from within the country do not qualify as “Canadian records.”
When Does CRA Conduct Audits Or Investigations?
Even if there is no obvious cause for an audit, the Canada Revenue Agency (CRA) may nonetheless opt to conduct one. The Canada Revenue Agency (CRA) has a four-year window after a tax return has been filed to conduct an audit. However, if fraud or misrepresentation is suspected, the window is extended, and the re-assessment can be conducted at any time. Keep your records for at least six or seven years, as this is the standard recommendation.
Most tax audits are conducted to ascertain if the person has paid an adequate amount of tax. It is possible for the CRA’s Criminal Investigations Program (CIP) to launch a criminal inquiry into a taxpayer if they have reasonable suspicions that the taxpayer is committing fraud or is willfully attempting to avoid paying taxes.
Conclusion
Knowing how long to keep financial records in Canada is an important part of managing your finances and understanding the tax implications. Financial records must be retained for a minimum of six years from the tax year-end in which they were prepared, but there are certain exceptions that may apply depending on your specific circumstances.
