Updated Checked by the Tax-Services.ca editorial team How we check
Yes, you can keep your books digitally in Canada, and the CRA accepts it on conditions. The main one is that electronic records must stay readable and usable for six years from the end of the last tax year they relate to, paper copies or not. Digital accounting compliance starts there, and moving to a cloud tool doesn’t pass that duty to the vendor. It’s still yours.
What does digital accounting compliance involve?
The CRA’s guidance on electronic record keeping sets the tests it will apply to you. Boiled down, there are six.
| Area | What the CRA expects |
|---|---|
| Format | Records readable and usable with CRA equipment and software |
| Retention | At least six years from the end of the last year they relate to |
| Backups | Restorable, labelled, not overwriting earlier periods |
| Testing | Backups tested from time to time to prove they restore |
| Location | Available in Canada, with backups kept in Canada if possible |
| Documentation | Description of how the system runs and controls against loss or change |
On the retention part, the CRA’s wording is short:
Generally, you must keep all required records and supporting documents for a period of six years from the end of the last tax year they relate to.
Record retention requirements, Canada Revenue Agency, canada.ca
Does the CRA certify accounting software? Not in the guidance we read. So when a vendor says its product is “CRA compliant”, that tells you very little. Hold the tool up against the table instead.
Can I throw out paper once it’s scanned?
Sometimes, but not casually. Someone in authority has to confirm in writing that scanning is part of your normal business practice. You then keep a log of the dates, who approved it, what was scanned and if the paper was destroyed, and the images must be of commercial quality and legible on screen.
Skip the log and a scan may not be accepted in place of the original. If you’re unsure, keep the paper. It costs a filing box, which is cheaper than an argument.
Is it a problem if my data sits on foreign servers?
Plenty of accounting apps store data outside Canada. The CRA discourages that, yet it accepts it when the records can be made available in Canada in a readable, usable form, and it recommends keeping backups inside the country. Ask your provider where your data lives and if you can export all of it on request.
That export question matters most when you switch tools or close an account. Download the ledger and the attachments first, because the six years keep running even if the subscription lapses.
A worked example with HST
Picture a consultant in Ontario who issues a $1,000 invoice in March 2026. At 13% HST the GST and HST calculator shows $130.00 of tax and a total of $1,130.00, and both figures belong in the digital ledger next to the invoice file.
The tax year ends on 31 December 2026, so those records have to be kept until 31 December 2032. File late, and the date moves, since the six years then run from the day the return was filed.
Payroll files follow the same rule. An Ontario employer paying one person $3,000 every two weeks would remit $961.03 each period, as the payroll remittance calculator shows, and every one of those remittance records is a document to keep.
Where digital books go wrong
Bank feeds on their own are the usual trap. A feed can be cut off or edited, and it holds no receipts, so keep the source documents as well. Shared logins are the next weak spot: nobody can tell who changed an entry. Give each person a login and keep the change history if the tool offers one.
One nightly backup that overwrites the last also fails the guidance. Keep earlier versions. And test a restore at least once a year, so you find out it works before you need it.
The upside of digital books is that you can see profit as you go. The profit margin calculator turns your totals into a margin, and the self-employed tax calculator estimates the tax on what’s left.
What should a small business do this month?
Three small jobs. Find out where your accounting data is stored and write it on one page. Run an export of last year’s books and open the file. Pick a date to test a backup restore, and put it in the calendar before tax time rolls around. None of these takes more than an afternoon, and together they cover most of what the table above asks for.
This page covers federal tax records only. It says nothing about professional body rules or other laws on privacy and data security. We also couldn’t check any rule that names a specific standard for encryption, so put that question to your adviser.
Where the numbers come from
The rules above come from the Canada Revenue Agency‘s information on electronic record keeping and on how long and where to keep records, read in September 2026. HST and payroll figures come from CRA rate pages and 2026 payroll tables. This site is independent and has no link with the CRA or any government.
Frequently asked questions
Can I keep only electronic records in Canada?
Yes, as long as they stay readable and usable and you keep them for six years from the end of the last tax year they relate to.
Does the CRA approve accounting software?
We found no CRA certification of accounting software in the guidance we read, so check any tool against the record rules yourself.
Can my records sit on servers outside Canada?
The CRA discourages it but accepts it if the records can be made available in Canada in a readable form, and it recommends keeping backups here.
Can I destroy paper after scanning it?
Only on the CRA's conditions, which include a written authorization and a log of what was scanned. If you're unsure, keep the paper.
How often should I test backups?
The CRA says to test them from time to time and sets no number. Once a year is a sensible minimum.
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