How Long Do You Keep Tax Records for Small Business in Canada?

How Long Do You Keep Tax Records for Small Business in Canada?

Whether you’re new to small business operations or run a successful setup, you understand the importance of keeping documentation on hand for reference, legal filing, and more. Did you know, however, that Canadian law requires you to keep most business documents on hand for a specific amount of time?  

In Canada, the law specifically states which documents small and large businesses must keep, in addition to the timeframes for which businesses must keep them. For some smaller operations, navigating these legal requirements and the storage systems that support them can seem complicated and stressful.  

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In this post, we talk about tax records and the laws that surround them. If you’re wondering, “How long do you keep tax records for small business in Canada?” this blog is for you.  

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Table of Contents

What Qualifies as a Tax Record?

For the purposes of tax filing, all records concerning revenue or funds of any kind count as a tax record. In Canada, tax records can include but are not limited to: 

  • Bills of sale
  • Permits
  • Contracts
  • Deeds
  • Mortgages
  • Stock and bond records
  • Leases
  • Notes receivable
  • Deposit slips
  • Property sales and tax records
  • Paid bills
  • Unpaid and paid invoices
  • Cancelled checks
  • All wage ledgers
  • And more 

To get a complete listing of documents your business needs to keep on hand as part of Canadian tax law requirements, consult the tax code or speak to an experienced and trusted tax professional in your area.

How Long Does the CRA Require Businesses to Keep Business Documents?

The general rule of thumb in Canadian tax law requires businesses to keep tax documents for six to seven years. According to the Canada Revenue Agency (CRA), this six-to-seven-year period begins when a business’s tax returns for a given year successfully pass filing checks and become accepted by the CRA.

Why Is Keeping Tax Records and Business Documents Important?

Failing to keep the necessary business tax records on file for the minimum six-year period can result in penalties levied by the CRA. In some cases, penalties could include audit processes, fines, and potential legal action.  

For some tax filing processes, businesses and individuals must also submit or include specific records or documents. Failure to list or include these records may result in what’s known as a “failure to report income.” Penalties for this transgression typically include hefty fines.  

Keeping all records efficiently organized in a safe and secure location for the retention periods that Canadian law requires can help prevent missing or misplaced documents needed for business and income tax return filings.

Best Practices for Business Document Storage and Disposal

Storing documents for tax returns requires careful organization and secure, weather-proof storage. Additionally, you’ll find the tips below helpful in creating or establishing practical document storage for your small business.

Store All Receipts

Notate Your Receipts

Keep Receipt Logs

Keep Both Physical and Electronic Records

Restrict Access to Document Storage

Log Access to Document Storage

Log Incidents of Document Disposal

Use Document Management Services

Concerning Electronic Record Storage

When researching how long you keep tax records for small businesses in Canada, remember that electronic recordkeeping efforts must follow a specific set of guidelines in Canadian tax law. The CRA specifies where you should store electronic storage servers, what level of access the entity must provide the CRA, and more. Destruction of paper or electronic records without permission from the CRA may result in prosecution.  

For the most up-to-date recommendations regarding CRA electronic storage requirements, consult the 2022 tax code or work closely with an experienced accounting expert in your area.

Storing Records Outside of Canada

The CRA will not grant permission for record storage outside of Canada to: 

  • Registered charities
  • Registered amateur Canadian athletic associations and organizations
  • Municipalities
  • Public bodies associated with a function of the Canadian government
  • Housing corporations that meet specific requirements  

As we mentioned above, the CRA requires tax-filing entities to request permission to store records outside Canada. If the CRA grants permission for this type of storage, businesses must give the CRA access to these records on request. For this legal requirement, records stored outside Canada and accessed electronically from within Canada do not qualify as records kept in Canada.

Requesting Permission to Destroy Documents Before the Retention Periods End

The CRA may grant limited permission for business entities to destroy tax documents before retention periods end. To acquire this permission, businesses must: 

  • Fill out and submit Form T137, a Request for Destruction of Records 
  • Submit an application in writing to the local tax services office

CRA permission to destroy records only applies to records kept under legislation administered by the CRA itself. The CRA does not possess the authority to grant permission to destroy records required for federal, provincial, territorial, or municipal law.


Browse Group Enroll Benefit Options for Your Workplace

Now that you know how long you keep tax records for small businesses in Canada, find out other ways to build success in your business by browsing our Group Enroll blog. To browse employee group insurance service providers, fill out our online quote request form today.  

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