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A company's records have to be kept at its place of business or the business owner's residence in Canada and have to be available, upon request from the Minister, for audit purposes. A taxpayer, who destroys or otherwise disposes of records or books of account to evade the payment of tax is subject to prosecution by the Minister.
The rules for record retention and destruction apply to tax documents and other documents, depending on the type of business operated. If records are maintained electronically then the computer records must be in an electronically readable format even when a paper copy of the records has been kept. Rules vary from regulating body to regulating body, and from jurisdiction to jurisdiction, and among all levels of government.
For tax purposes, provinces state their policy on record retention through their respective legislation, but where theirs is silent, then those rules specified by Canada Revenue Agency (CRA) apply.
CCRA.s general rules provide the following:
General Ledgers and any special contracts or agreements necessary to an understanding of the entries in the general ledger, must be retained for 6 years after the last day of the taxation year in which the business ceased for an individual or 2 years after dissolution if a corporation.
Corporate minutes books, share ownership and share transfer registers must be retained for 2 years following dissolution of the corporation.
Most other records (e.g. invoices) must be retained for 6 years after the last day of the taxation year to which they relate, however, written permission for earlier destruction can be obtained from CRA.
Even after the retention requirement has expired, it may be desirable to retain certain documents. For example, those that support the purchase of important properties, significant agreements etc, or those required to support the adjusted cost base and the resultant capital gain or loss on final disposition of an asset.
© 2015 John B Voorpostel CPA, CA, CMB
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